Jiang Jiemin, former president of China National Petroleum Corp. (CNPC), was appointed chairman of the government body responsible for managing state-owned enterprises (SOEs), raising questions about future reforms.

According to a March 25 statement published by the State-owned Assets Supervision and Administration Commission (SASAC), Jiang, who quit his job at CNPC on March 18, has replaced Wang Yong to head the commission.

It has become something of a tradition for the chairman and president of CNPC and China Petrochemical Corp. (Sinopec) to be named either the leader or second-in-command of a ministry or local government.

Li Yizhong was Sinopec's president before he became party secretary of the SASAC. Current Fujian governor Su Shulin was once the vice president of CNPC and later Sinopec's president.

Jiang, 58, is decisive, people who have dealt with him say, and has good command of the details of CNPC's oilfields, reserves and projects. The big question in many people's minds is how he will use his time as SASAC head to deal with reform of SOEs.

In recent years, SOEs, especially central government-controlled companies, have been criticized for taking advantage of their positions to take ownership of a large quantity of resources and expanding into fields other than their areas of expertise. Also, some SOEs have run up large debts and only survive because of subsidies from the central government.

Many in the public are also unhappy that executives and SOE employees enjoy excellent salaries.

SASAC is drafting guidelines to deepen reform of SOEs, the Economic Information Daily newspaper published by Xinhua reported. It cited a source at the state assets regulator.

SASAC expects to divide SOEs into two types, namely those that perform a public service and those that are competitive, an idea proposed by Wang Yong, the outgoing chairman of SASAC.

Career Path

Jiang has worked in the oil industry for decades and held a series of posts in the field.

In November 1999, PetroChina Co. Ltd., a wholly owned subsidiary of CNPC, was established and Jiang became director and vice president. In April 2000, PetroChina listed in both Hong Kong and New York.

Back then, people at CNPC did not understand the idea of rate of return on capital, a source who helped CNPC go public said. They only cared about how much oil the company produced, so restructuring was something of a rebirth for the massive SOE.

Jiang was transferred to Qinghai to be vice provincial governor in June 2000. He used the experience gained from working at PetroChina Co. to promote SOE reform in that northwestern province. He held that position until April 2004.

He then was made vice president of CNPC, and in November 2006 was promoted to president of CNPC.

Reform Efforts

There are two views as to how Jiang will lead SASAC.

One theory is that Jiang, with his experience as a government official in Qinghai and leading CNPC to undertake restructuring and go public, will lead the SASAC to accelerate SOE reform.

However, others say that SASAC has, in recent years, become the voice of central government-controlled companies and represents these companies' interests. Thus, in this view, Jiang, as the former leader of China's largest oil producer, will keep his mindset of trying to improve the company's standing. This would mean such government companies would expand more aggressively in the future.

There are 115 central government-controlled companies under SASAC. Jiang faces three problems when he takes office, said Zhou Fangsheng, former deputy director of SASAC's enterprise reform bureau.

First, the parent companies of central government-controlled firms must conduct shareholding reform because at present most are funded by the state. Zhou says the government should let private and foreign capital enter the market and take stakes in these companies.

Second, the market should be opened so SOEs and companies with different ownership backgrounds can compete against each other. Third, loss-making SOEs must be forced to exit the market, and government should not use subsidies to save them.

SASAC itself is also in need of reform, some say. This year, the outgoing Wang said that there were problems in the management of state-owned assets. He suggested regulatory and day-to-day company functions be separated, and local governments should reduce their interventions in SOEs daily operations.

However, for many experts the greater issue is the reform of SOEs.

"The top level of government should resolve to address SOE reform," an industry expert source said. "It should not be SASAC that proposes it. The State Council should set the plan for SOE reform."