'There are a lot of power struggles and ego clashes,' he said. 'The problem is that if the general manager is the centre, and the party secretary is the core, how can you reconcile managing one enterprise with, in fact, two bosses? That is the fundamental flaw within the system.'

City University political science professor Joseph Cheng Yu-shek said: 'This is a very serious problem. On the one hand, it is important for the party to maintain its control over SOEs, but on the other, there is an urgent need to reform loss-making, state-owned enterprises and to adopt a modern enterprise system which gives autonomy to the general manager.'

Mr Liang agreed these contradicting goals often created trouble. For instance, the hiring of senior management and other key staff has to be approved by the standing committee, chaired by the party secretary. If the newcomer is somebody the general manager dislikes, then establishing a good working relationship will be difficult.

Mr Liang said he and the general manager co-operated most of the time, mainly because they had developed a trusting relationship over the years. But such cases were rare, in his opinion.

According to party policy, all major business decisions, important personnel changes, and large-sized investments need the approval of the standing committee - meaning the party has control over the firm.

Professor Cheng believes the party will not surrender control of the sector, despite repeated promises to reform the state-owned enterprises, most of which are bankrupt or close to it.

The diminishing role the party played at grassroots level meant it could not let go of state-owned companies, he said.

'One-third to one-half of party organisations are defunct in rural areas. Collectivism is collapsing and the party cadres are busy making money. It is a dilemma that has yet to be solved by the party and it is creating a lot of tension with enterprises,' he said.