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China Briefings

Reports on China issued by Samsung Economic Research Institute

Sinopec’s Attempt at Change

Sinopec’s Attempt at Change

Samsung Economic Research Institute Beijing Office

Dec. 28, 2012

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Sinopec is the largest petrochemical company in China with five businesses consisting of the HQ, mining and exploration, refining, marketing and retail/ wholesale and petrochemical engineering. As one of the leading state-owned companies in China, Sinopec has been especially strong in petrochemical products, which has been proven by its high sales largely on a rise in sales volume following an increase in production capacity and a sales price increase.

Changes in the global economy and market demand have also brought about changes in the refining and chemical engineering industries. While Sinopec needs to develop and store more resources to support China's economic growth, it also needs restructuring as demand for certain petrochemical products have decreased and use of alternatives has increased. Unlike other state-owned companies that are reluctant to implement restructuring, Sinopec introduced a strategy that places priority on overseas mining and exploration while reducing the chemical engineering business through "Selection and Focus."

Sinopec has grown as a leading state-owned enterprise because it has not been complacent with its status and pursued continued transformation, and prepared for its entry into the global market by first moving into underdeveloped markets. It has even downsized businesses that have a competitive advantage in order to improve profitability and secured stable revenue sources and growth driver.

In response, foreign companies should build friendly strategic partnerships with China's state-owned companies as they have political and economic influence in order to create opportunities to enter the market. Identifying characteristics of these companies and building competitiveness in technology and negotiating power against governments are prerequisites.

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