Corruption probe may show cracks in state monopoly power

The widening probe of corruption linked to the powerful state oil sector has raised hopes that it could be the trigger for a reduction in the predominance of China's state-owned enterprises (SOEs). Their controlling market power in strategic economic sectors is an obstacle to sustainable growth that should come from giving a greater role to the private sector, which creates more jobs.

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Former CNPC chairman Jiang Jiemin is being investigated for dealings during his 40-year career with the company. Photo: Bloomberg

Published: 12:00am, 4 Sep 2013Updated: 3:05am, 4 Sep 2013

The widening probe of corruption linked to the powerful state oil sector has raised hopes that it could be the trigger for a reduction in the predominance of China's state-owned enterprises (SOEs). Their controlling market power in strategic economic sectors is an obstacle to sustainable growth that should come from giving a greater role to the private sector, which creates more jobs.

These hopes are likely to be disappointed in the short term. But the corruption probes of several present and former chiefs of the China National Petroleum Corporation are, hopefully, the writing on the wall.

A wave of investigations, including that of former CNPC general manager and recently retired party security chief Zhou Yongkang , has prompted analysts to speculate about the motivation.

Ironically, it has also taken down the head of the State-owned Assets Supervision and Administration Commission which oversees the mainland's 100 biggest corporations, thereby further raising hopes for further reform. However, Jiang Jiemin is being investigated for dealings during a 40-year career with CNPC during which he rose to chairman.

The leadership's annual secret summer meeting endorsed the move against Zhou. It is the first time a current or former member of the Politburo Standing Committee has been probed for economic crimes. The exception is likely to have been prompted by anger over the scale of official corruption combined with the accumulation of wealth by Zhou's family and his support for disgraced former politician Bo Xilai.

The targeting of so many senior executives of CNPC has given rise to speculation that this could provide the opportunity for the party's third plenary session in November to shake up state-owned monopolies in a number of strategic sectors of the economy.