Sinopec stake sale signals move to privatise state-owned enterprises
More state company sell-offs will be discussed at this week's key government summit, officials say
The mainland's decision to sell a stake in a subsidiary of Sinopec signals more privatisation of its bloated state-owned sector will take place soon, with plans likely to be discussed at this week's parliamentary session, officials and experts said.
Sinopec, Asia's biggest oil refiner, said on February 20 that it would sell up to 30 per cent of its marketing arm, which owns more than 30,000 petrol stations, in a multibillion-dollar asset restructuring.
It was China's first announcement of a major restructuring since President Xi Jinping unveiled sweeping reforms of the economy at a Communist Party conclave last November.
He promised to encourage more private participation in state-owned enterprises (SOEs), which include some of the world's largest companies.
"Reform towards fully mixed ownership will increase, in such areas as petroleum and petrochemicals, power and telecommunications," said Zhang Chunxiao, an adviser at the State-Owned Assets Supervision and Administration Commission (Sasac).
Sasac is a ministerial-level body run by China's cabinet and is directly responsible for 113 state-owned companies, including Sinopec, four giant banks, oil giants PetroChina and CNOOC, and China Mobile.
Beijing will, however, retain control of critical lifeline industries, including enterprises related to national security and key economic sectors - upstream energy, transport and ports - Zhang said.
Policies governing SOE restructuring and the introduction of private investment will be discussed at the annual session of China's parliament that begins today, state media reported.
Over the last 20 years, China has gradually introduced private investment and Western-style management to its SOEs and turned the country's biggest government conglomerates into firms listed on the stock market.
SOEs controlled by the central government owned 378 subsidiaries trading on global stock markets by the end of 2012. Provincial and local government firms had listed another 681 companies by the end of last year.
Critics say the sheer size and market dominance of big state firms creates a drag on the economy through vast opportunities for waste and corruption. SOEs enjoy privileged access to low-cost credit and draw more than 35 per cent of total bank loans.
Provincial and local governments, which control the majority of the mainland's more than 140,000 SOEs, are also getting in on the act. In recent weeks, local governments in several provinces, including Guangdong and Shaanxi, have said they will seek more non-state investors.
Besides making SOEs more responsive to market forces, such privatisations could help unlock enormous hidden value.
The marketing and distribution division of Sinopec accounts for nearly half of the group's annual total operating profits.
However, much more needs to be spelled out before private investors will be confident of any privatisation scheme, analysts caution. Corporate governance at state-controlled joint ventures is problematic, and management often puts national interest ahead of minority shareholders.