China gets tougher on SOE corruption

China's huge state-owned enterprises (SOE) are seen by the public as both too corrupt to save and too powerful to fail. But with dozens of high-profile cases exposed since 2012, China's ongoing anti-corruption drive offers hope for change in SOEs.

On Monday, former head of the State-owned Assets Supervision and Administration Commission, Jiang Jiemin, who was once chairman of oil giant PetroChina, was expelled from the Communist Party of China (CPC) for serious discipline and law violations.

He was found guilty of taking advantage of his post to seek benefits for others and extorting and receiving a huge amount in bribes, according to the CPC Central Commission for Discipline Inspection.

In April last year, Song Lin, then chairman of state-owned China Resources, was put under investigation for suspected serious violations of discipline and law.

Jiang and Song are among a long list of high-ranking executives and managers at SOEs to be taken down since 2012. Over 50 people in sectors ranging from oil, steel, power, telecommunications, aviation and transportation have been felled in the fight against corruption.

"Chinese SOEs have become a field for the play of power and money and collusion between officials and businessmen. Thus, they are an unavoidable part of the anti-corruption drive," said economist Hua Sheng.

China has thousands of SOEs and 113 of them are directly administered by the country's central authority. These enterprises are deemed the backbone of the economy, but their monopolies in many areas, unchecked spending and corruption have long been a source of public complaints.

The latest crackdown on SOE corruption is viewed as the government's effort to clear obstacles in the push to reform wasteful and inefficient SOEs.

"Corruption poses a major threat to the steady progress of planned SOE reforms," said Li Jin, chief researcher with the China Enterprise Research Institute. He cited insufficient self-regulation and the absence of outside supervision as major problems.

One of the solutions to the system's reform is to bring in social capital.

A decision released after a key reform meeting last November pledged to actively develop a diversified ownership economy and allow more SOEs and other firms to develop into mixed ownership companies. Non-state shares will be allowed in state capital investment projects, effectively opening SOE shareholding to private enterprises.

Since the meeting, several SOE have taken the initiative in implementing reforms.

In February, China's top oil refiner, Sinopec, decided to restructure its lucrative distribution business and allow social and private capital to take up to 30 percent of shares, followed by the State Grid Corporation's decision to open two business sectors in May.

But on the higher policy level, progress has been slow. Although rumors have surfaced several times that China will unveil a systematic guideline on SOE reforms, no specific timetable has been given yet.

The state asset regulator said on Tuesday it has examined the draft plans on SOE reform and improvement of the state-owned assets management system and will submit them to higher authorities for approval as soon as possible.

Some media reports said earlier that the final plans would be published in September, but the implementation work and the launch of pilots is likely to start next year.

In the reform process, keeping a tough hand on corruption will be vital for success, analysts said.

"Only through the harsh crackdown on corruption can we avoid reforms from being reduced to a feast for a few," Hua said.