Core Viewpoint - The Chinese government is launching a nationwide campaign to eliminate illegal fuel production and sales, which is expected to enhance the competitive environment for legitimate businesses and increase industry concentration [2][3]. Group 1: Regulatory Actions - The Ministry of Emergency Management announced a special campaign from June to December 2025 to crack down on illegal fuel production and sales [2]. - The government will strengthen the enforcement of fuel consumption tax regulations, which may lead to a more equitable competitive landscape for legal enterprises [2]. Group 2: Industry Structure - Approximately 52% of China's 123,000 gas stations are privately owned, contributing to 25% of the total fuel sales in the country [3]. - The total fuel consumption in China is projected to reach 390 million tons in 2024, with private gas stations expected to sell around 100 million tons [3]. Group 3: Refining Capacity and Policy Initiatives - By the end of 2024, China's refining capacity is expected to reach 955 million tons per year, nearing the regulatory limit [3]. - The government plans to control crude oil processing capacity to within 1 billion tons by the end of 2025 and aims to improve energy efficiency in the refining sector [3].

Investment Rating - The report maintains an "Accumulate" rating for the oil and petrochemical industry [1]. Core Insights - The report highlights the implementation of a special rectification campaign against illegal fuel sales, which is expected to enhance the concentration in the refining and sales sectors [7]. - The National Development and Reform Commission has set a target to limit the national crude oil processing capacity to 1 billion tons by the end of 2025, with over 30% of capacity exceeding energy efficiency benchmarks [2]. - The report notes that as of 2023, there are approximately 123,000 gas stations in China, with private stations accounting for 52% of the total, selling about 25% of the country's refined oil consumption [7]. Summary by Sections Industry Overview - The report discusses the ongoing reforms in the oil and petrochemical sector, including the tightening of consumption tax regulations and the push for industry standardization and scale [7]. - It mentions that the total refining capacity in China is approximately 955 million tons per year, nearing the regulatory limit [7]. Regulatory Developments - The report outlines the government's plans to enhance fiscal reforms, which include improving local tax management and increasing local financial autonomy [2]. Market Dynamics - The report indicates that the legal businesses will benefit from a fairer competitive environment due to the crackdown on illegal operations, potentially leading to increased market concentration [7]. - It emphasizes the significant role of private gas stations in the market, highlighting their contribution to overall fuel sales [7].