Mistrust in Sinopec deal unfounded

The State-run oil giant Sinopec Corp announced Monday that 25 domestic and foreign investors bought a 29.99-percent stake in its wholly owned subsidiary, Sinopec Marketing Co, through a direct capital injection.

The deal received a dubious reception from the public, who suspected it amounted to a sell-off of national assets. After all, most people view the centrally administered State-owned enterprises (SOEs) as property of the Chinese people. If their assets are sold too cheaply, many people believe it amounts to a loss for the entire country.

Sinopec is the latest company to allow foreign investment as part of a national reform movement to allow mixed ownership of centrally administered SOEs.

Despite the public's mistrust, there is a great chance the reforms will succeed without the loss of national assets. To begin with, the stake in Sinopec Marketing was sold for about 107 billion yuan ($17.43 billion), which exceeded the most optimistic expectation.

Moreover, Sinopec Marketing has attracted many leading companies such as Tencent, China Life, Haier and RT-Mart. Sinopec intends to expand its non-fuel business through these partnerships.

A booming non-fuel business can contribute a lot of profit to Sinopec Marketing whose main source of income had been oil sales.

In foreign markets, non-fuel income usually makes up more than half of a gas station's profit.