China: PetroChina's “Group Purchase Gate” created an online stir

Some employees of PetroChina, the state-owned oil giant and the current no. 2 on the FT 500 List, are going to be allowed to ‘group purchase’ eight apartment buildings near Beijing’s CBD at only about thirty per cent of the actual price.

PetroChina is a state-owned monopoly, along with its sister company Sinopec. Because they are state-owned, they often enjoy preferential government policies and because they are monopolies, they are always able to manipulate the market to their own advantage. Thus they enjoy the best of both worlds.

Recently, almost all the major news stories about them have been negative in tone. They include the corruption case of Sinopec’s former chief, a new pricing mechanism which helped PetroChina to make staggering profits during global economic recession and a revamp of Sinopec’s office building that included a 12 million RMB (1,750,000 USD) chandelier.(Sinopec claimed that the chandelier ‘only’ cost 229,000 USD, which merely served to stir yet another round of ridicule.)
The current ‘Group Purchase-Gate’ scandal especially touched on the nerves of China’s urban middle-class and lower middle-classes. Many of them have recently become car-owners and so fairness in gas pricing system naturally becomes one of their concerns. Moreover, tens of millions of these people, many of whom young people, also feel victimized by the soaring housing prices in the recent years in all the major cities of China.

The market price of the apartments that PetroChina's employees are going to purchase is 23,000 RMB per square meters, a price that most Chinese citizens, even those living in the urban areas, can not afford. However, for PetroChina employees, the price is only 8,000 RMB per square meter. This huge difference creates profound suspicion in people's minds, especially when PetroChina already enjoys such a privileged position. It may not have exploited its position in this instance, but huge suspicion of abuse of power is sure to result. For instance, many people immediately suspect that PetroChina has arranged an under-the-table or even illegal deal to compensate the developer for the lower price.

A netizen summed it up in this way:


Undoubtedly, abuse of power exists in this affair. Personal interests are pursued using the power conferred by the state and the status of a monopoly. They make the state bear the cost and make the people pay the bill. This seriously wounds the harmony of the society. Solidarity of a society cannot exist with such acts of widening the economic gap.

A degree of envy is also prevalent among many people.


It is easy to find shade under a big tree. We little people can never hope for that!


I will devote my whole life to trying to become a PetroChina-man.

On the Aug 26, a PetroChina official announced that it had not paid a single penny towards this group purchase, which seemed to suggest that no public funding was used as in many people's minds, ‘state-owned’ equates with ‘public’.  The official admitted that PetroChina had helped to make the arrangements but the contracts would be signed by individual employees. In addition, the negotiation process for this deal was begun in 2005 when housing prices were still low and this was the major reason that PetroChina employees were able to enjoy such a huge discount.

However, as many bloggers and netizens have pointed out, such a response fails to dispel the suspicion. For why else can a real estate developer appear to be so stupid, or, in PetroChina’s terms, so generous?

On the other hand, people like real estate blogger Niu Dao expressed the opposite opinion:


PetroChina is a profitable monopoly and its employees’ income and welfare should not be inferior. But, can any ordinary PetroChina employee, even after 10 years’ working, stand up and say ‘I can buy an apartment at this time?’ Since they can't, what is wrong with providing employees with adequate welfare through group purchase discounts?

PetroChina may not be wrong in this instance, but the rumors and envy still abound. The giant cannot get away with its original sin. What the current controversy has revealed is the urgent need to reassess the role and the rights of state-owned enterprises. What is even more urgent, as with Chinese government as a whole, is that comprehensive and transparent systems need to be established and implemented, so that trust can be rebuilt and unnecessary suspicion can be effectively neutralized.

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