Sinosteel and Its Governance the Significant Influence of the Government

3623 Words Jan 24th, 2014 15 Pages
This paper has the aim to deep understand the typical problems of the Corporate Governance of China's State-Owned Enterprises (SOEs) and how, during the years the role of the Chinese government is changed. In particular it will discusses Chinese corporate governance in this narrow sense and attempts to explain the political core function of Party Organization. Moreover it will analyze a real case: “Sinosteel Corporation”. This company was created and projected by the Chinese government with the aim to be the leader in its sector. Its corporate governance is deeply influenced by the party consequently by the Chinese government, which contributed to its establishment and growth through several government-subsidies.

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In order to reach its goal the state is subjecting the SOEs to a new and different set of rules: the rules of organization under the ‘‘modern enterprise system”. This is what the policy of corporatization is chiefly about. However policymakers believe that they must revise and adjust this set of rules to take account of continuing state ownership.
Consequently several problems rise. Firstly it is not easy to measure the achievement of many of these goals and it is also difficult to find a way of balancing them one against the others. For this reason there are also quite a few monitoring difficulties. Secondly, due to the followed strict policy of continued state involvement, several conflicts of interests emerge between the state as controlling shareholders and the other ones. In particular the state exploits minority shareholders by using its control for different purposes other than value maximization, in this way the minority shareholders have no other way to benefit from their investment.
Last but not least, corporate governance is about more than simply getting the rules right. The necessary supporting institutions must be present as well. Nevertheless their existence in China cannot always be taken for granted.

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