Transformation of a Chinese State-Owned Enterprise

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Transformation of a Chinese State-Owned Enterprise - Guangzhou Metro Corporation
Guangzhou Metro Corporation serves as an example of how a previously poorly performing state-owned enterprise with a dubious reputation can be transformed into arguably the best-run mass transit company in China.

Established in 1992, Guangzhou Metro is a Chinese urban rail transit state-owned enterprise (SOE) under the government of Guangzhou, one of the largest cities in China. With registered capital of RMB 6.28 billion and assets of RMB 22.4 billion as of the end of 2005, Guangzhou Metro is responsible for the development and operations of Guangzhou’s mass transit system. The company also operates a diversified range of ancillary businesses, such as advertising, property development, telecommunications, and consulting services.

Through the implementation of the transformation program put together jointly by the Guangzhou Metro and Booz Allen Hamilton project team in 1999, the transformation is widely regarded as one of China’s most successful SOE change programs. Today, Guangzhou Metro has more than 6,700 employees, with 161 senior managers and 494 in middle management. Two of its major lines—Line 1 and Line 2—are fully operational, with a total length of 36.6 kilometers and an average rider volume of 470,000 trips per day. Ongoing construction includes Line 3, Line 4, Line 5, the new airport line, the trial section of the Guangzhou-Foshan line, and the branching of Line 2 and Line 8.

Guangzhou Metro’s transformation blueprint cuts across most of the key dimensions of the company, including business strategy, corporate governance, corporate portfolio rationalization, business and management processes, organization structure (with emphasis on the relationship between the headquarters and the subsidiaries), and culture. The project team also addressed one of the most critical issues Guangzhou Metro faced at that time—the relationship between the enterprise and the government.

Booz Allen's Ed Tse is the author of the study "Transformation of a Chinese State-Owned Enterprise — Guangzhou Metro Corporation."

study posted December 18, 2006