China Briefing | Breaking monopolies of state-owned enterprises is key for sustainable economy

Chen Tonghai, the disgraced chairman of oil giant Sinopec - so the story goes - once likened the state-owned behemoth to the "eldest son of the People's Republic" that was naturally entitled to monopolise its sector.

Such arrogant and high-handed remarks, if true, reflect the thorny problem of what is to be done about monopolies in the hands of state-owned enterprises. For Chen and other top executives of state firms, their situation is akin to the eldest son in a traditional Chinese family who receives special treatment over and above his siblings.

Despite the mainland leadership's decades-long efforts to restructure the state sector as a modern market economy, the major state-owned firms still maintain full or near monopolies in strategic industries like telecoms, energy, banking and public transport. If anything, they have become stronger and more powerful.

Thanks to the monopolies, easy access to bank credit and the lack of proper supervision, the state-owned enterprises have become a breeding ground for corruption.

In 2009, Chen was given a suspended death sentence - later commuted to life imprisonment - for accepting nearly 200 million yuan (HK$250 million) in bribes. Over the years, a number of top executives of state firms from China Mobile to China National Nuclear Corp have ended up in jail with convictions for graft.

Since last year, a high-profile scandal involving a number of senior executives at another oil giant, China National Petroleum Corp (CNPC), who were connected to the top leadership, has also highlighted the fact that state monopolies are also deeply involved in political infighting within the Communist Party.