Wednesday, December 28, 2011

Self deceit, self conceit in Chinese SOEs

For the first time in my professional career, I attended a Chinese state-owned public company's annual meeting last week. During that meeting, the chief executive briefed the audience (the senior management team and highest-ranked divisional managers across the country and overseas) on the overall performance of the company in the past year, described its challenges as well as opportunities ahead, and laid out its specific goals and targets for the coming year.

It's not surprising to hear both praises and criticism from the speech, but upon hearing one of the praises, I couldn't help myself drifting a bit far away because I really found that praise a little over the top and even somewhat disturbing. It went like this, "...our financing department has made marvelous achievement in the past year, having successfully secured large loans from major banks during the time of an extreme credit tightening". Interesting, huh? Is this really a marvelous achievement?! Or is it just something they are born with, something they are entitled to, or something they can easily do but others can't? Everyone knows that major SOEs in China could easily get cheap credit from big banks which, by the way, are also state owned. Sometimes the banks are even begging them to borrow money from them!

I know there could be some variation among SOEs themselves too in terms of the capacity to get cheap loans - scale, region, industry - all those things matter, but comparing to millions of small and medium sized firms in the private sector, that label, SOE, alone is like a golden pass to seemingly endless funding. Now this unfair ability somehow became a "marvelous achievement"?!

It's safe to say that this kind of image burnishing is not merely confined to this particular company. I certainly didn't see this as an achievement of Chinese SOEs at all, what I see from this specific case is management delusion, self deceit, self conceit, and maybe most important of all, a need to change.

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