The new market-based pricing system will also encourage distributors like ENN and China Gas that are expanding into global gas trading to look at importing LNG.
"The policy will help the whole (gas) distribution sector and restore utilities' profitability," said Tan Yuwei, general manager of capital management at China Gas Holdings.
Shares for listed gas utility companies briefly reversed this year's trend downwards after the policy was announced, but they remain under pressure from lacklustre industrial demand and China's struggling economy.
China in recent years has liberalized natural gas prices by allowing distributors to pass costs on to industrial and commercial customers, although Beijing maintained tight control over household prices to avoid a consumer backlash.
"This policy reform will result in more reasonable downstream gas prices in China, which will encourage city gas utilities to increase purchases from upstream importers," said Yi Cui, an analyst with consultancy Rystad Energy, referring to Chinese national oil companies.
Persons:
COVID, Tan Yuwei, Tan, Yi Cui, Chen Aizhu, Emily Chow, Andrew Hayley, Tom Hogue
Organizations:
ENN Energy Holdings, HK, China Gas Holdings, China Resources Gas, Shanghai Gas, Chongqing Gas, Changchun Gas, China Gas, National Development, Reform Commission, China Gas Association, Rystad Energy, Beijing, Thomson
Locations:
SINGAPORE, BEIJING, China, Changchun, Qingdao, Nanjing, Shijiangzhuang, Lanzhou, Hubei, Guizhou, Shaanxi, Beijing, Hebei, Singapore