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Corporate Perspective: Why Enterprises Are Concerned about the Management of the City
On the eve of National Day, 21 provincial enterprises—including five chemical companies—were transferred to Baoji City. Last week, another 27 state-owned enterprises were assigned to Xianyang City’s management, marking a broader decentralization of Shaanxi’s provincial enterprises into local governance. This shift has sparked concern among many large chemical firms in the province, who have been closely monitoring the situation and exploring ways to navigate the changes through asset restructuring and corporate reorganization. Some are even seeking partnerships with major industry players like coal and oil companies, even if it means allowing these entities to hold shares. The goal is clear: to find stability by aligning with larger, more powerful partners and avoiding the risks of city-level management.
Why are companies resisting this transfer? According to recent surveys, chemical firms have several concerns. First, they worry about whether local governments can effectively coordinate logistics and supply chains. Chemical production often involves large-scale inputs and outputs, requiring extensive rail networks that span multiple railway bureaus. In the past, provincial authorities helped manage these complex operations during emergencies. Now, under city-level control, such coordination may no longer be possible, potentially leading to disruptions in raw material procurement and transportation.
Second, there's fear that once under city management, the company might become a target for local administrative pressures. Some executives recall that when business was tough, local departments rarely provided real support. If fully transferred, issues like personnel management and budget approvals could become more complicated, increasing the risk of being neglected or even phased out.
Third, there's concern about the impact on the company’s reputation. Provincial enterprises typically enjoy a higher status and broader networks, which contribute to their strong external image. Once transferred to city-level management, they fear their intangible value may decline, affecting future growth and employee morale.
The reluctance of enterprises to move under city management raises deeper questions about the pace and direction of state-owned enterprise reform. While decentralization can offer better macro-level oversight from the provincial government, it also brings challenges. The case of Dongfeng Tire, which recently faced difficulties after frequent changes in leadership, serves as a cautionary tale. Although its decline had multiple causes, the instability caused by shifting management structures played a significant role. This highlights the importance of stability in leadership and governance—frequent changes, whether from “grandmother†to “mother-in-law,†can be detrimental to long-term success.