China's Sinopec Sale Points to Next Round of State Privatization

Policies governing state-owned enterprise restructuring and the introduction of private investment will be discussed at the annual session of China's parliament that begins on Wednesday, state media reported.

Over the last 20 years, China has gradually introduced private investment and Western-style management to its state firms and turned the country's biggest government conglomerates into stock market-listed shareholding firms.

Beijing's central government-controlled SOE's 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. State-owned companies enjoy privileged access to low-cost credit and draw more than 35 percent of total bank loans.

SIGNIFICANT

The stake sale in the Sinopec subsidiary is significant since it will offer investors a chance to enter China's highly controlled and sprawling downstream fuel market.

It remains unclear whether Sinopec would divest the stake through a trade sale to investors or through an initial public offering on the stock market.