Beijing reviews state firms' assets abroad

PUBLISHED : Thursday, 26 July, 2007, 12:00am
UPDATED : Thursday, 26 July, 2007, 12:00am
 

Latest scrutiny may uncover misuse of funds and lead to tighter controls, reports say


The central government has nearly completed a review of about one trillion yuan of offshore investments and assets held by state-owned enterprises in a move that may uncover corrupt use of state funds and lead to tighter controls of such assets, mainland media reports said.


The review, coming at a time when the government is encouraging increased overseas investment, started in April and may be completed by the end of next month, the People's Daily overseas edition reported yesterday.


The move follows a similar but relatively small-scale review conducted in the 1990s. No result of that review was released and analysts said the findings of the latest review were not expected to be released.


State-owned enterprises control at least one trillion yuan in overseas assets, with their investment focused on international trade, the People's Daily said, citing official statistics. About 75 per cent of the firms involved lost money or made no gains in overseas markets, the report said.


The central government has not independently audited those firms' overseas operations, nor does it have a supervision mechanism. This loose supervision has led to the loss of state assets through poor business decisions and corruption, the 21st Century Business Herald reported.


The review, jointly conducted by the Ministry of Finance, the State-owned Assets Supervision and Administration Commission, the Ministry of Commerce and the State Administration of Foreign Exchange, is expected to look into the overseas investments and operations of more than 1,000 state enterprises to prevent assets from being lost, the People's Daily said.


The loss of state assets was highlighted by the US$554 million loss incurred by China Aviation Oil Singapore in 2004, when its director, Chen Jiulin, misjudged the markets and bought oil futures contrary to central government policy.


Other companies take away state assets by simply compiling deliberately incorrect accounting reports or secretly transferring money to their private accounts, the 21st Century Business Herald said.


Sources close to the assets review said the state assets regulator would check the finances of companies under its direct watch while local governments would look into firms with headquarters in their regions. Industry watchdogs such as the banking and insurance regulators would review firms in their specific areas.


Based on the review outcome, the central government would develop a two-fold supervision system for state firms' assets, requiring them to build an internal supervision system while related ministries would develop an external audit system. The audit result will provide a reference for two new regulations covering supervision of the offshore assets of state enterprises, the People's Daily said. Ministry of Commerce officials have said publicly that they are encouraging companies to invest anywhere in the world, although developing countries rich in labour and natural resources but lacking technology and industrial infrastructure are the highly recommended destinations.


Share

 

Send to a friend

To forward this article using your default email client (e.g. Outlook), click here.

Enter multiple addresses separated by commas(,)

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive