Beijing cracks whip at state-owned firms

Beijing cracks whip at state-owned firms

CHINA'S new leaders are showing stronger resolve in their anti-graft fight with an ongoing crackdown at a state energy group.

But observers believe the crackdown could also be an unusual policy tool aimed at pressuring China's powerful state-owned enterprises (SOEs) to adopt more market-oriented reforms, which could be unveiled at a top party plenum in November.

The growing economic heft of the SOEs - some of whose annual revenues rival those of many developing economies - has not only made their head honchos seem "untouchable", but also given them immense clout to resist policy changes that could affect their turf and bottom lines.

Thus, by publicly going after four senior executives at China National Petroleum Corporation (CNPC), the ruling Chinese Communist Party was sending a strong signal that it would not tolerate further obstructionism.

Besides the quartet, state asset regulator Jiang Jiemin, CNPC's former chairman, has also been sacked over "serious disciplinary violations" - a code word for graft-related misdeeds - making him the first Central Committee member and highest-ranking official to fall since China's power transfer in November.

University of Chicago analyst Yang Dali said the crackdown would rein in the state sector, which "advanced at the expense of the private sector in many cases and became kingdoms in their own right".

"These recent efforts will make it easier for Premier Li Keqiang to promote and implement more market-oriented reforms," he added.

China's new leadership under President Xi Jinping (in photo above) and Premier Li is keen to boost the private sector in a bid to grow domestic consumption and rebalance from an export-driven growth path.

But there are reports of strong opposition from the SOEs, which are reluctant to cede turf and power.

Anti-graft expert Xiao Bin of the Sun Yat-sen University in southern Guangzhou city believes the probes show that the Xi-Li team has managed to get backing from the communist elders in taking on the SOEs.

"The leaders know China's economy needs new growth stimulus and one way is by expanding the private sector, but that will require breaking up the SOE monopolies," he told The Straits Times.

"They would have convinced the elders that the party could face more trouble if the economy doesn't rebalance and faces a crisis, with unemployment spiking and companies going bust."

But some are not optimistic of significant SOE reforms at the third plenum, as the leaders would not want to rock the shaky Chinese economy that is heavily driven by the state sector.

Standard Chartered Bank's economist Stephen Green told Hong Kong's South China Morning Post on Tuesday that "the likely outcome (and the goal of reformers) is that SOE reform will be facilitated, quietly and indirectly, by other reforms".

Noting that SOE reforms will take place in an evolutionary process, he added: "The only problem with evolution is that it usually takes ages - and the results cannot be predicted."

The leaders could be harbouring other end-goals, like bolstering their authority and purging their opponents, say observers.

While some have linked the CNPC probes to a corruption investigation of retired security czar Zhou Yongkang, Beijing-based analyst Russell Leigh Moses believes they are more about the anti-graft crusade and "less about politics".

Hong Kong-based analyst Joseph Cheng said another goal could be to boost the leaders' image given the disdain towards the SOEs for their huge profits and their executives' fat salaries.

"So taking on the SOEs can prove a very popular move for the new leadership," he added.

Get a copy of The Straits Times or go to for more stories.

This website is best viewed using the latest versions of web browsers.