China’s Oil Industry: ‘Corporate Governance with Chinese Characteristics’

Abstract

Through a process of gradualist reform, China’s national oil companies (NOCs) — China National Offshore Oil Corporation (CNOOC), China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec) — have been transformed into globally competitive state-owned enterprises (SOEs) with subsidiaries listed on domestic and international stock exchanges. Poor performance among Chinese SOEs provided the impetus for the latter phase of this transformation from the mid-1990s onwards, whereby the focus of ongoing enterprise reform shifted to ownership and corporate governance restructuring (Ewing 2005: 319; Naughton 2008: 20; Wildau 2008: 28). Despite the corporatisation of the NOCs, the Chinese government retains tight control not only over the holding companies, but also their publicly listed subsidiaries through majority share ownership and a range of unique corporate governance mechanisms, which taken together are often referred to as ‘corporate governance with Chinese characteristics’ (Liu 2006: 418; Ewing 2005: 320). In assessing the nature and extent of control that the Chinese government continues to wield at the firm level, it is necessary to examine the institutions and mechanisms employed by the central party-state to manage and govern the NOCs and their publicly traded subsidiaries.