State enterprises and outward investment options

John Garnaut writes for The Age, via Sydney Morning Herald:

China's state-owned enterprises (SOEs) are more competitive with each other and less beholden to central command than outsiders often think. But there's another web of incentives that can override those corporate interests: the private interests of officials who control them.

Here's a real life micro-example of how it can work. You can imagine larger mutations of this story as Chinese government enterprises go out into the world.

A close contact of mine has been getting into business with someone who I'll call Lee. Lee has two money-generating assets. The first is his father, who is a key executive at one of China's biggest shipping companies, which is state-owned. The second asset is his friendship with a key executive at the resources-buying arm of a large Shanghai Government-owned conglomerate.

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Read the complete post at http://www.smh.com.au/business/marching-to-a-different-drum-20100207-nkts.html