Refinery of a different kind

Reluctant hotelier? Fu Chengyu

Oil companies struggle to be popular anywhere. But in China they find it especially challenging – particularly after they hike prices at the pump, as they did recently. Domestic critics view the state-owned oil majors as profit machines that do little to further the public good. Why, they ask, are a bigger chunk of their earnings not taken by the government to spend on improving public services?

In this context any signs of extravagant spending tend to get lambasted. Hence the furore around recent reports that Sinopec has opened a luxury hotel in a forested Beijing suburb – built at a cost of $118 million. According to a Nanfang Daily investigation, hotel staff confirmed that the ‘Beijing Heyuan Royal Garden Hotel’ is a subsidiary of the oil firm. “It’s not on a map and there’s no sign at the entrance,” explained the Nanfang Daily, “so even many locals don’t know that the mysterious luxury hotel exists.” The five-star facility has 208 rooms and 9 villas, and sits in 70 hectares of grounds.

The Economic Observer also visited and asked why so much had been invested in “such a low profile and ultra-luxury hotel?” What, it wonders, is the purpose? Is it a business venture or is it designed as a lavish retreat for the firm’s senior staff? Netizens veered between disbelief and anger.

Sinopec is no stranger to this type of controversy. In 2009 it had to respond to internet claims that the massive crystal chandelier at its Beijing headquarters cost more than $1.8 million. A company official retorted the chandelier ‘only’ cost $228,000. “It’s quite obvious why the public is angry,” wrote the Beijing News. “Even that’s exorbitant for a chandelier.”

Earlier this month the company also found itself in the headlines for the wrong reasons. The public was stunned when Sinopec’s Guangzhou office was revealed to have spent $400,000 on wine and liquor last September – including the purchase of 17 bottles of Chateau Lafite Rothschild. Xinhua reported that Sinopec had described the purchases as part of “normal operations” – however, a Guangzhou-based manager was later demoted.

But such gaffes may soon become a thing of the past thanks to the firm’s new boss. SASAC, the state body that oversees the oil firms, has just installed Fu Chengyu as Sinopec chairman (the former holder of the office, Su Shulin has resigned). Fu is known as a no-nonsense oil guy and during his long tenure running CNOOC earned international respect for his management skills. Perhaps the first question he may ask of Sinopec managers: why do we own a secluded luxury hotel?

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.