Relaxation of control over the upstream business of the petroleum industry in China is discussed. The authors suggest that a basic institutional preparation should be made before relaxing control over the upstream business, and that the institutional preparation includes at least four parts: 1) setting up the admission standards, 2) perfecting the management system of mining rights, 3) reforming the royalty and taxation system for oil and gas resources, and 4) improving the supervision and management system. Stressing the institutional preparation before relaxation of control does not mean that China could not relax control over the upstream business until the management systems are perfected, but the authors suggest that China could establish a necessary system for relaxation of control and to improve it with future practice.