Since China opened its economy up to foreign investments in the late 1970s, its growth measured in GDP has centered around ten percent annually. Unsurprisingly, its energy consumption has followed and currently situated China as the second largest energy consumer in the world with the fastest increase in energy consumption per capita. Naturally, the topic of how China will secure this rising energy demand has spurred discussion not only within the Chinese government but also throughout other major energy consumers in the world, underscoring China’s potential impact on the availability and market price of energy resources such as oil and gas. In this graduate paper I will discuss the important factors influencing the decision-making process and power relation relevant to the development of China’s national oil policy. The reason why I have chosen this topic is of course rooted in the presented problematic issues above. In addition, although this has been a widely published topic there are still uncertainties of which factors actually drives the Chinese oil related investments overseas. As a result, in this paper I will present an institutional framework which I have developed to answer exactly this issue. This institutional framework is primarily based on two overlapping theoretical frameworks, namely that of neo-mercantilism economic theory and Institutional Political Economy. Through an assessment of China’s economic model and how it has evolved since the opening up in the late 1970s, I correlated these economic frameworks to the Chinese empirical model and developed the institutional framework I refer to as China’s version of state capitalism. Based on this framework, I formulated three principles that, as will be presented in this paper, dictate the overall agenda of China’s policy in terms of the importance of State-Owned Enterprises and National Oil Companies to the Chinese economy. These qualitative research results combined with my institutional framework and two case studies illustrating the adaptation and promotion of my research results have resulted in the conclusion that: China is not promoting a neo-mercantilist policy of “locking up” foreign oil reserves. On the other hand, the Chinese institutional framework of state capitalism which executed through its principles and coordinate between the state and the institutions through the Chinese cultural and socio political guanxi network and the nomenklatura system constitute the best explanatory model for how the Chinese national oil policy is developed and executed.