Beijing is also trying to pull off a delicate balancing act: imposing the disciplines of the market on management while keeping policy control of its national and local champions firmly in trusted hands. This has led to the creation of a hybrid group structure, not dissimilar to the industrial groupings that underpinned Japan Inc.
Under this model, a holding company, run by politically appointed managers, controls a network of associated operating companies via controlling or minority shareholdings. One or more of the associated companies may be selected as the vehicle for a public listing on a stock exchange; others of the associated companies may be designated to absorb a large amount of the group’s underperforming assets. [Full Text]