Temasek Case Study

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Is Temasek the right model for reforming Chinese SOEs?

Temasek is a sovereign wealth fund created after British occupation, it helps to promote nation-building, create jobs and invests in priority enterprises. As an active shareholder and investor, its portfolio covers a broad spectrum of sectors including financial services, telecommunications, media and technology, transportation and industrial. It is owned by the government, important for government revenue and national growth but is separate from the government and operate under the provision of Singapore Companies Act, thus not a mechanism for government control. The Temasek model is a success in Singapore, one of the characteristics of this model is the disclosure requirements in which
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One fundamental component which differs the business culture in China than any other Western countries is the presence of Guanxi, a dynamic network of relationships among various parties that cooperate and support one another, to emphasize the importance of interpersonal relationships as well as social status in Chinese business society. Although the Chinese government is making a decent effort to minimize governmental influence in the operations of SOE firms, and yet, it is hard to deny that the Chinese government officials are more inclined to exercise their power to make decisions which in fact is not accordance with the central government. They approve projects or allocate resources to the corporations out of moral obligations as well as monetary motivations, which may drive the SOE firms to the opposite track of efficiency. This deep-rooted widespread corruption problem in China deserves our immediate attention; more than 300,000 officials were found guilty of corruption last year, and yet, this number continues to reach its new height according to China’s corruption …show more content…
In Singapore, among the three main operators within the market, Temasek Holdings is the majority shareholder in Singtel which contributes 46% of the total mobile market share. However, the Chinese government is majority shareholder for all three players in China, namely China Telecom, China Unicom and China mobile while the last one holds 70% of the total market share. Considering the extremely large population in China, the government plays a decisive role which leads to a much less vibrant market. Additionally, the entry barrier in Singapore is also lower as the My Republic is also trying to enter the mobile market. Similarly, in the finance industry in China, four major banks are all state-owned while Temasek only holds 11.46% of the share of DBS and it still faces competition from POSB, UOB, and OCBC. Therefore, if Temasek model is to be adopted by the Chinese government, it is inevitable that a large amount of privatisation would be necessary. As such, drastic changes and industry restriction would result in an earthquake for the state economy and thus makes it either unrealistic or require a long time

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