The restriction will also limit options for independent refineries in the coastal regions that had been hoping for alliances with foreign firms or domestic oil majors to improve their standing in the domestic market, which is dominated by a few state-run firms.

In new guidelines on foreign investment, jointly released by the National Development and Reform Commission and the Ministry of Commerce, foreign companies will not be allowed to invest in refineries with annual capacity of 160,000 barrels per day or less, which would include many independent refiners that have emerged in recent years.

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China will retain a controlling stake in fuel sales joint ventures that involve only one foreign investor, sell different brands of fuel products from multiple suppliers and operate more than 30 stations.

Foreigners will not be allowed to hold controlling stakes in entities that build or operate power grid networks, although this was a relaxation of previous guidelines that had totally banned foreign investment in the sector.

Foreign firms are encouraged to take part in exploration of oil, gas and coal-bed methane, but only if they form joint ventures with local companies. REUTERS