China Mobile Shows Power Still Lies With the Party

The tentacles of state-owned enterprises extend into every nook where profit can be made“, the National University of Singapore’s Zheng Yongnian told The Economist recently. SOEs, in turn, are riddled with and sometimes tripped up by the tentacles of the Communist Party. The Financial Times describes the case of China Mobile, where the government has dictated key appointments and technological decisions.

At first glance it looks easy to tell who is in charge at China Mobile, the world’s largest mobile phone operator by subscribers – industry veteran Wang Jianzhou is chairman of both the Hong Kong-listed company and its majority stakeholding parent.

In reality, however, things are not so simple. In a terse notice last week the listed company revealed that Mr Wang had been replaced as secretary of the Communist party committee at the state-owned parent company by Xi Guohua, former vice-minister for information technology ….

Such is the strange world of Chinese big business, where an enthusiastic embrace of the trappings of global capitalism and corporate governance collide with the hard facts of political power in a one-party state. While China’s communists long ago cast aside any pretence to ideological purity, they remain determined to keep tight control over the state companies that command the economic high ground ….

Some observers of Mr Xi’s appointment last week wonder if it is part of a wider clear-out linked to the waning influence of former Chinese president Jiang Zemin and the upcoming retirement of current leader Hu Jintao. Others see it as punishment for Mr Wang for failing to prevent China Mobile becoming ensnared in a series of corruption scandals since 2009. More benignly, the move could be seen as simply a preparation for the 63-year-old chairman’s retirement.