Political Battle Precedes Economic Reform in China

The energy sector is slowly reforming in China thanks to Xi Jinping's anti-corruption drive and removal of political rivals.

Reuters: No big bang, but quiet reforms reshaping China's oil and gas sector
Instead, Beijing is ushering in moderate pilot-based changes - granting private refiners oil licenses, encouraging a first private-led mega-refinery and overhauling the management of state-run assets - steps that seem fragmented but share a common goal of boosting efficiency across the sector.
Back in 2014, I posted China Begins Breaking the Oil Monopoly, which relayed news that China had given a private company a license to import oil. That kicked off a reform effort that is picking up steam. But why is the oil industry first in line for reform?

From 2013: The Battle For China Continues On All Fronts
The big story of late is the corruption scandal at Chinese national oil companies, which is filled with political overtones...With Bo being taken down, his Red faction lost power and supporters such as Zhou Yongkang were quickly sidelined. However, the faction still had influence and power, which is why there is now a more thorough rooting out of this faction.

Former oil company chief and protégé of ex-security tsar Zhou Yongkang is latest graft probe target
The head of a cabinet agency overseeing the 100 largest state-owned enterprises is being investigated for corruption in what appears to be a widening probe into the state oil industry - a key powerbase of former senior party leader Zhou Yongkang.
China prefers a slow and steady path to reform, but even small steps are meeting resistance. Except when the resistance is removed.

Back to the Reuters article on oil reform:
A low-profile experiment at a Sinopec overseas unit badly hit by the collapse in the price of oil over the last 18 months offers evidence that changes in how state assets are managed may be the next phase of the reform process.

Orchestrated by the state asset regulator, Sinopec last month tapped China Chengtong Holdings Group Ltd and China Reform Holdings as strategic investors at SIPC, its overseas exploration and production vehicle that operates multi-billion assets that include Canadian oil sands and deep-sea concessions in Brazil.

The two firms, both state-owned investment vehicles, will hold a combined 70 percent stake in SIPC. Sinopec holds the rest and remains as the operator.
Remember Sinopec?

Guardian, October 2015: Former head of China's Sinopec under investigation for corruption
Su took over as Fujian governor in 2011 after a lengthy career in the oil industry, which has been a major target of anti-corruption investigators.

Starting as a geologist in the north-eastern Daqing oil patch, Su rose to general manager of China’s largest oil refiner, Sinopec, before moving into the provincial government offices. He is among the highest-ranking serving officials to be caught up in the anti-corruption drive launched soon after Xi’s assumption of China’s presidency in March 2013.

China’s state-dominated energy sector has come under special scrutiny during Xi’s crackdown, partly because of its role as a power base for political rivals.

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