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Energy

Beijing taps outsiders to lead Sinopec and State Grid

Xi administration tightens grip on energy giants in blow to 'cliques'

China National Petroleum Corp. replaced its retiring chairman Jan. 17 as part of a broader leadership reshuffle in the energy sector.   © Reuters

BEIJING -- Three of China's largest state-owned energy companies replaced their top leaders Friday, two with industry outsiders, in what is seen as a bid by Beijing to assert greater control as well as a possible prelude to a broad sector realignment.

China Petrochemical -- better known as Sinopec Group -- China National Petroleum Corp. and State Grid Corp. of China all appointed new chairmen with immediate effect.

Sinopec Group's new chairman, Zhang Yuzhuo, previously led top Chinese coal-mining company Shenhua Group and in 2017 became the head of a special economic zone in Tianjin. He is the first Sinopec chief to hail from outside the oil industry, Chinese outlet Caixin reported.

Zhang replaced Dai Houliang, who took over as CNPC chairman. Such moves between companies are not uncommon among Chinese oil majors. Zhang and Dai are expected to chair their respective companies' main listed subsidiaries: China Petroleum & Chemical for Sinopec, and PetroChina for CNPC.

State Grid brought in as its new chairman Mao Weiming, a member of the Communist Party's standing committee in Jiangxi Province. Like Zhang, Mao is believed to be the first head of the company to lack experience in his sector, having worked at an insulation factory before starting his political career.

Appointing outsiders shows President Xi Jinping's government's "determination to eradicate corruption at state-owned enterprises and redraw the industry map," an investment firm executive well-versed in China's energy sector said.

Industry "cliques" of Communist Party bigwigs and executives of state-owned enterprises are a feature of Chinese politics, with the oil and electricity cliques particularly prominent. There are those who see these networks of vested interests as a sign of insufficient control by Xi's government.

The reshuffle appears intended to deal with this issue in a sector strategically important to Beijing for its role in the public's lives as well as in trade. China just agreed in its "phase one" trade deal with the U.S. to buy large quantities of American liquefied natural gas.

Sinopec, CNPC and State Grid rank in the top five of Forbes magazine's Global 500 companies, with each posting annual revenue of roughly $400 billion. The Xi administration provides them with support as the core of the nation's energy industry while also looking to tighten its grip on their management to speed implementation of its policies.

In a meeting this week of the Central Commission for Discipline Inspection, Xi emphasized stamping out corruption at state-owned enterprises. Even as fewer Communist Party members are ensnared by the anti-graft crackdown he has spearheaded since 2013, SOEs remain in its crosshairs.

Beijing has taken aim before at the cliques' cozy ties between government and business. Among the most notable cases is Zhou Yongkang, an ex-Politburo member and former head of a CNPC predecessor who was arrested on corruption charges in 2014. Zhou is believed to have played a central role in the oil clique at the time.

Former CNPC chief Jiang Jiemin came under investigation in 2013, followed by Su Shulin, a previous chairman of Sinopec, in 2015. Both were later sentenced to lengthy prison terms.

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