Sinopec Embraces Reform to Diversify Business

In 2013, China ushered forth reforms to the ownership model for state-owned enterprise. This was done in a bid to embrace private capital for mixed-ownership, and diversify the businesses of state companies. The move has notably allowed China’s state owned oil giant Sinopec to make forays into other businesses. The firm now plans to jointly operate thousands of filling stations and convenience stores.

This is a flavor of the new products and services being offered at convenience stores by the joint management team of Sinopec and Taiwan’s supermarket brand C-Store.

In the West, 50% to 70% of filling stations' profits come from "non-fuel" business. But, in China, "non-fuel" business only accounts for one percent of Sinopec's retail sales. It could indicate huge potential for change.

"Our cooperation with C-store just started recently. The opening feedback was very good. This joint store agreement started operating at the end of last year. The varieties of goods have increased to 1,600 types from about 600 types. And the daily turnover has increased to over 8,000 yuan from 6,000 yuan. That's about 35% growth," says Zhou Guohua, from Sinopec Zhejiang Oil Products Comapany.

Sinopec Marketing has sold 29.99 percent of the shares of its retail unit to investors for over 17 billion dollars. The 25 investors are from both home and abroad. 11 of them are private companies.

"Sinopec as a state controlled enterprise has considerable monopoly power on oil resources. The mixed-ownership model will bring opportunities to private companies to step in the natural resources industry that used to be controlled by state enterprises. This is a big step in reform," says professor Shi Jinchuan, from School of Economics, Zhejiang University.

(  Edited by Topco)