With the title “Being eaten by the dragon,” this week’s Economist has a briefing based on a survey of 11 executives of Western companies that have recently been acquired by Chinese state enterprises (and in one case a private one). The picture is what I expected to see: the executives have a variety of opinions, but most of them tend to have a positive view of Chinese managers’ intentions – such as honoring agreements not to fire any previous staff – but a more negative one of their ability to deliver a business strategy, in part because of an opaque and lengthy decision-making process. (The syndrome diagnosed as “state enterprise disease” by Ma Yu. As a result, most companies have been unable to retain their Western staff. As to whether they kept Western executives on for substantive tasks or just for show, opinions differed.
Meanwhile, on 3 November, Zhao Jianfei of the English-language Chinese finance news site Caixin profiled Li Jinhong, Sinopec’s Australia branch director. She (! — how many female managers are there at this level in the oil business?) has had to “to cope with dashed investment expectations, a near-disaster, a contractor dispute and the Australian arbitration process” and “faces a number of challenges, ranging from high labor and equipment costs to an ever-changing policy and political environment.” She
initially planned to bring low-cost labor to Australia from China for construction projects, but found those plans infeasible.
Li said she understands why Australia has been reluctant to open doors to non-Australian labor (…). “Any country would protect their local workforce,” said Li, but adding [sic] that Australia has not specifically barred Chinese exploration teams but has exercised its immigrant labor requirements.
“For instance, there are certain requirements in areas of experience and language proficiency” for imported workers, she said. “Plus, it’s been mandatory to employ a percentage of locals, which offsets the cost advantages of bringing in Chinese teams.”
Earlier, Caixin ran a story about Metallurgical Corporation in China, whose shares have been in decline after a series of overseas acquisitions, including in Papua New Guinea, Pakistan, Australia, Argentina, and Afghanistan, have eaten up the company’s operating margins. These projects have suffered numerous setbacks and been criticized as irresponsible. ” Shen Heting, who serves as company president as well as party secretary and vice chairman of MCC’s parent China Metallurgical Group Corp,” listed a number of reasons, including political issues in Afghanistan, “tribal problems and the illegal arrests of Chinese technicians” at the Ramu mine in Papua New Guinea, and high operating costs in Australia, “since Chinese workers are not allowed in.” Shen
thinks the Chinese government should provide additional financial support. MCC is acquiring resources for the country overseas, he said, and should be given a corresponding level of policy support, with cash at the core. … “This business is not only something we want to pursue but something we need to do for the country.”
These comments are interesting since they come at a time when senior officials have been trying to convince Western public opinion that Chinese enterprises are not receiving state help in their projects overseas but pursuing their own objectives. It is likely that there already is a split between older state cadres and younger managers in the state enterprises, although the “privatization of profits and nationalization of losses” has long been a logical pattern in state enterprise operations.