Chairman of China's Largest Listed Company Resigns Abruptly

June 29, 2007 Updated: June 29, 2007

On June 22, 2007, China Petroleum and Chemical Corporation (Sinopec) announced that the company's director and board chairman, Chen Tonghai, had resigned, citing only “personal reasons” for leaving his post. Many are left to speculate as to the actual story behind his resignation. On June 25 a Hong Kong newspaper, Tai Kung Pao , quoted a Beijing source claiming that the sudden resignation is linked to the chairman's suspected involvement in unlawful financial gains. The source reports that on the day before his resignation Chen was required by authorities to confess his crimes within a given deadline.

Mainland China's official media outlet, Xinhua News Agency, announced that following Chen's resignation, Sinopec vice chairman Zhou Yuan is to temporarily fulfill the duties as chairman and director. Formally a general manager and secretary of the Chinese Communist Party (CCP) Committee of Sinopec as well, Chen also resigned from these posts, leaving Su Shulin, former vice president of PetroChina Co. Ltd., to assume the responsibility of these positions.

Executives from the petroleum and chemical field said that news of Chen's abrupt resignation quickly spread throughout the industry.

As of June 25, Chen could no longer be found on the information board for Sinopec's board of directors.

Chinese authorities have recently taken to cracking down severely on corruption to appease a thoroughly discontented populace. The Beijing source indicated that following the investigation and punishment of a succession of high ranking officials, including Chen Liangyu, Qiu Xiaohua, and Zheng Xiaoyu, the Central Committee for Discipline Inspection, the Department of Supervision, and the National Audit Office will expose more corrupt officials in the near future.

International business circles have varied in their opinions of the impact Chen's sudden resignation will have on the company. Goldman Sachs predicts a short-term decline in Sinopec's stock, while Standard & Poor asserts that Chen's resignation will not have immediate influence on the company's credit rating. But Sinopec's A-shares and H-shares did experience drops when gossip was circulating earlier accusing Chen of involvement in a Shanghai social insurance fund case.

Sinopec is a major petroleum company and China's largest listed company. Its business ranges from oil and gas exploration, refining, to the production and marketing of petrochemical products.