China

PetroChina to Reportedly Spin Off Non-Core Businesses

Summary:

 

  • PetroChina Company (PTR) will reportedly spin off non-core businesses such as hospital and schools, according to Sina.
  • The company has declined to comment.

 

Why It Matters:

  • As the largest state-owned oil company in China, PetroChina operates more like a semi-government entity. The company employs  1.46 million, and it is operating a significant number of redundant services, including for schools and hospitals, due to historical reasons.
  • The spin off will leave these businesses to local governments or as partnerships with private companies in continuing the services. PetroChina has experienced a huge profit drop due to low oil prices. In the first nine months, it recorded a 94.4% decrease in net profit to RMB 1.74 billion
  • It s not clear whether PetroChina can spin off these businesses successfully. The government has to consider potential protests from redundant employees, and local governments might not able to take the businesses over due to their weak financial positions.