The sale of Rizhao Steel occurred at a crucial moment in the Chinese steel industry. Previously, the Chinese government encouraged state-owned enterprises to open up and get out of their comfort zones. However, the new government wanted to improve China’s steel industry’s profitability. Therefore, in the first place, it was necessary to encourage a private steel company to acquire Rizhao Steel. Du Shuanghua took up the challenge.
Firstly, the government wanted the sale to be approved by the State-owned Assets Supervision & Administration Commission (SASAC). While this may seem like a bureaucratic hurdle, the purchase was approved in December 2010, and Rizhao Steel became a subsidiary of Shandong Iron & Steel Group Corp.
The Future of the Chinese Steel Industry
Du Shuanghua’s decision to sell Rizhao Steel Co., Ltd was based on the specific issues of the global steel market. He believed that the global economy was still in recession, making the financial success of Rizhao Steel Co., Ltd unlikely. Du was faced with the decision to either cash out of Rizhao Steel Co., Ltd and prepare for a lengthy recession or stay with the company in the hope of a better future.
He opted for the latter option and changed the company’s ownership structure. Rizhao Steel Co., Ltd became a private company, with the current partners sharing a 30% stake.
The New Ownership of Rizhao Steel Co., Ltd.
Over the last decade, Du Shuanghua worked with the original owners of Rizhao Steel Co., Ltd., which comprised the Shandong Iron & Steel Group Corp., the Shandong Iron & Steel Group Corp., and Hanlong Group. Hanlong Group is a major state-owned enterprise in China, and it currently has a more than 60 percent stake in the company. This is the major company that Du Shuanghua worked with to help grow the steel market in China.
Although the companies are often called “state-owned enterprises,” they are closely owned by the state itself. The owners, however, are usually transferred to other government bodies after a certain amount of time. This allows the owners to have control over the company.