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To: Think4Yourself who wrote (45569)	5/27/1999 9:25:00 PM
From: Tomas	Read Replies (1) \| Respond to of 95453

China's 2 largest oil companies said Thursday they planned to cut almost 1 million jobs over the next five years, illustrating the country's dilemma as it takes halting steps to open to foreign competition but grapples with a mounting unemployment problem. China National Petroleum Corp. and China Petrochemical (Group) Corp. said they would cut a total of about 976,000 workers by 2004. ''China's petroleum industry faces very serious challenges today,'' said Liu Yan, director at the petroleum division of China's State Administration of Petroleum and Chemicals Industries. ''Our state oil companies have many inefficient units and very high costs of operations.'' The planned job cuts come amid on-again, off-again talks on China's possible entry into the World Trade Organization. Membership in the organization would require Beijing to open markets, cut import tariffs and make companies more efficient. China's state oil companies would have to compete with sources of cheaper oil imports, and oil companies around the world are merging to slash costs. China National Petroleum, also called CNPC, plans to slash its work force by one-third in five years, from 1.5 million workers today, said Luo Yingjun, vice president at the country's largest oil company. China Petrochemical, known as Sinopec, plans to reduce its number of workers to 714,000 from 1.19 million by 2003. Last year, the company said it would cut its staff by a quarter in the next five years. ''We have too many employees to be productive and efficient,'' said Li Dongmei, a director in the company's planning department. ''We're operating in a very tough environment, and reducing the number of our employees is one way to bring our costs down.'' The job cuts could save the company as much as 4.76 billion yuan ($575 million) a year in wages, based on an average annual wage in the industry of 10,000 yuan per worker, Mr. Li said. That figure does not take into account the cost of severance payments. The layoffs are to be made across all units at Sinopec, which controls Hong Kong-listed companies such as Zhenhai Refining & Chemical Co., Shanghai Petrochemical Co. and Beijing Yanhua Petrochemical Co. The announcement of the job cuts comes a year after the Chinese government ordered the two oil companies to swap assets as part of a nationwide reform effort. They now have a more integrated business, from oil production to refining and production of petrochemical products. A steep decline in global crude-oil prices last year squeezed both companies, whose earnings fell short of official targets. A plunge in prices of petrochemical products last year added to their problems. Beijing Yanhua Petrochemical Co., China's biggest plastics maker, reported that its 1998 profit fell 84 percent. Shanghai Petrochemical Co., China's largest chemical company, saw its 1998 earnings slide 67 percent. CNPC's refineries, with a total capacity of 105 million tons a year, are operating at 63 percent of capacity, almost the same rate as Sinopec's. Such low utilization rates mean high costs for the companies. To make matters worse, China loosened its grip on domestic oil prices last July, aligning them with a monthly average of Brent crude oil contracts traded on the Singapore International Monetary Exchange. Chinese oil prices remain higher than international prices despite that change. ''CNPC's most serious problem today is high costs,'' Mr. Luo said. ''We're cutting costs to survive and be competitive.'' ''We want to cut our work force by a third in three to five years' time,'' he said. ''We can't do it too quickly, or there will be a lot of social problems.'' The prospect of so many lost jobs will add to concern that rising unemployment could threaten China's social stability. China's urban unemployment rate at the end of 1998 stood at 3.1 percent, unchanged from the year before, according to official statistics. But economists and analysts say the actual figure could be much higher. Under Prime Minister Zhu Rongji's ambitious plans to streamline the Chinese government bureaucracy, an estimated 4 million government employees were laid off in 1998. The Chinese authorities are now delaying plans to completely deregulate domestic oil prices for fear that an earnings decline at state oil companies could slow the country's economic growth. ''Our plans to completely deregulate domestic oil prices will have to be delayed until next year,'' Mr. Liu said. Bloomberg News, May 27 iht.com