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Business

China's executive reshuffle expands to auto industry

Dongfeng Motor and FAW Group will be led by chairmen from each other's ranks.

BEIJING -- China has named new chairmen at two state-owned automakers, part of President Xi Jinping's effort to tighten his grip on sectors ensnared in anti-graft investigations.

     Senior managers at FAW Group were stunned when an official from the Communist Party announced the automaker's new chairman at an emergency meeting Thursday. They are now going to report to Xu Ping, who had previously led rival Dongfeng Motor.

     Xu had started out at Second Automotive Works, Dongfeng's predecessor, and remained there after it became Dongfeng. He cut his teeth as an engineer and eventually became chairman, a position he held for five years. While both Dongfeng and FAW are state-owned, they compete against each other in manufacturing and sales.

     In mid-March, Xu Jianyi, then chairman of FAW, became a target of a graft probe by the Communist Party. The Central Commission for Discipline Inspection accused Xu of "serious violations of party discipline and law," leaving his post empty. The personnel shake-up put many at the company on edge, as they brace for a major shakeout.

     Meanwhile, Dongfeng announced Wednesday that it will bring on Zhu Yanfeng, former FAW chairman and current vice party secretary of Jilin Province, as its next chairman. Top executives at China's state-owned automakers have usually picked from career employees at the companies, making the latest appointments unusual.

     One factor behind Beijing's sweeping executive shake-ups is the government's intention to impose its will on the economic sphere. Many of the top officials who were stepping down were appointed during previous administrations.

     Observers say Xi is trying to fill the top spots at major state-owned businesses with executives whose views align with his own. Xu, FAW's incoming chairman, secured a capital tie-up between Dongfeng and PSA Peugeot Citroen last year, and is believed to have views on economic policy that are similar to Xi's.

     The government's eagerness to flex its muscles in personnel appointments may be another factor. The ability to select top corporate executives belongs exclusively to the party. But vested interests linked to top party officials and bureaucrats used to stand in its way.

     The so-called oil clique, centering on disgraced former top official Zhou Yongkang, is among the most prominent of these interests. Major automakers are seen as falling under the purview of the industrial machinery clique, whose members include former President Jiang Zemin. Xi's government has dug particularly deep into these "untouchable" areas as part of its anti-corruption campaign by sending special investigative teams.

     Speculation is rife over major realignments, including mergers between China Petroleum & Chemical (Sinopec) and PetroChina and between FAW and Dongfeng. Beijing aims to consolidate state-owned enterprises to step up their overseas expansion. It hopes to use mergers and business integration to make these companies larger, enabling them to compete with rivals in Japan, the U.S. and Europe.

     The government has started looking into reducing the number of major state-owned companies from 112 to 40, according to local media. It might be already plotting major industry realignments.

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