The Corporatization of the Chinese Oil and Petrochemical Industries: Evolution without Revolution

This chapter discusses the relationship between structural changes, governance, and performance improvement in the so-called “privatization” of three Chinese oil companies and aims to determine if governance and long-term performance of these organizations could be improved through a “corporatization” process implemented without substantial changes in the institutional, ownership, and legal structures of the country. Before highlighting some propositions and findings, a theoretical foundation will be laid out to provide a context for the debate surrounding these issues. The first part of the theoretical background section discusses the governance issues facing companies in emerging markets in general and in China in particular. These are mainly related to ownership structures and the behavior of the various entities controlling the organizations whose shares are being listed. The second part of this section sets out the premises by providing the theoretical framework regarding the measurement of performance in terms of both the criteria used and the time period considered. It also presents the arguments that are subsequently reviewed in the context of the so-called Chinese corporatization/privatization process. The next section discusses methodology issues and the paucity of data to assess the validity and quality of the investment decision-making process in these organizations.