Cao Xiaoxi, chief engineer of Sinopec's Economic and Development Research Institute, agreed, saying the subsidy should not be dubbed as "protective."

"The loss is caused by policy flaws, so it should be covered by the State. It has nothing to do with market protectionism," Cao said.

The compensation to Sinopec's refinery business was 10 billion yuan (US$1.28 billion) last year.

Han Xuegong, a senior consultant for China National Petroleum Corp, said the State financial support would decline as price-mechanism problems are fixed, noting that this year's subsidy is only half of last year.

Although the government raised prices for major oil products twice this year, "it is not enough to make up for the deficit of Sinopec's refining business," Han said.

The fundamental solution is to reform the current pricing system, he added.

A fully market-oriented pricing mechanism, however, will take time, Han Wenke, director of the Energy Research Institute affiliated to the National Development and Reform Commission, told China Daily.

"It will not happen overnight. It will depend on market circumstances and the ups and downs of the global oil prices," he said.

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