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Shirley Yam

Can anyone from Citic Pacific's management tell me when  the company's chairman, Larry Yung Chi-kin, is returning to Hong Kong? Or should I ask Beijing?
I  ask because I just can't see how  regulators can conduct a proper investigation into the HK$15.7 billion trading loss without talking to the key figure.
I  ask because only with a proper investigation can  Hong Kong's integrity  as an international financial centre be preserved.
I  ask because I have witnessed a similar scandal being handled properly in another market, but question whether we will handle it appropriately here.
Let me  remind you of the China Aviation Oil (Singapore) Corp scandal  in Singapore in 2004,  which shares many similarities with the Citic Pacific  situation (see table).
On December 2, 2004, the state-owned jet fuel supplier announced that it had  lost  US$550 million   betting on a drop in oil prices. It was  the first financial scandal in the city state to involve a mainland company.
While many wondered if the island republic had  the backbone to stand up  to Beijing, a key political partner and supplier of listing firms, within a week Singaporean regulators and police had announced a probe.
This was followed by a statement from the State-owned Asset  Supervision and Administration Commission,  the mainland's  assets watchdog, denouncing the jet fuel supplier's error  as a serious violation of the decision-making process and promising to hold the responsible officer accountable.
A day  later, China Aviation Oil chief executive  Chen Jiulin, who like Mr Yung returned to the mainland immediately after the disclosure, was sent back to Singapore to face  arrest while the news media looked on.
Subsequently,  a Singaporean court jailed Chen and fined other  executives for making false statements and breaches of fiduciary duty.
Chen was also expelled by the Communist Party, which is tantamount to  the end of his political and business life.
Beijing's unprecedented co-operation with Singapore  was meant to  showcase to internal and external audiences that it would play by international rules.
In the case of Citic Pacific, we are talking about a much bigger loss and suspect the red chip's handling of the matter.  This includes  possible negligence,  a six-week delay in disclosure, and a statement that all was well  a week after discovering the  huge loss.
Yet the authorities' response  has been relatively sheepish. In Hong Kong, the stock exchange and the Securities and Futures Commission confirmed an investigation would follow, but few details have been made public. In Beijing, the state-asset watchdog has not uttered a word.
These are not encouraging signs.  In fact, insiders are telling me to expect little more than what we have already seen.
'It is already the result of six weeks' negotiation and compromise at the top level,'  one  source said.
The 'compromise' includes the press conference to announce the loss, the firing of two financial heads, the downgrade of Mr Yung's daughter who was  directly involved in the  bet and the US$1.5 billion bailout loan from parent Citic Group.
This is because Mr Yung is no ordinary  state-owned enterprise manager. The communist leadership is indebted to his father, who was one of the wealthiest tycoons in pre-1949 China and a key supporter of the nationalisation of private wealth by the party.
Nor is Citic Pacific an ordinary SOE, over which Beijing has full control. We still do not know if state money or Yung family money launched the firm, but  it is the only state-level enterprise where the management  owns a substantial stake and runs it  like a family business.
Neither is the Australian iron ore project an ordinary commercial decision. It is a strategic move by Beijing to secure increasingly scarce mineral supplies and Citic Pacific shoulders the cost and risk, including the currency volatility that causes the huge trading loss.
The matter begs a simple question: If Hong Kong regulators cannot do their job properly on a scandal of such a mammoth scale, how damaging will be the effect on the 'one country, two systems' policy, Hong Kong's rule of law and its status as an international financial centre?
Singapore has  shown the world  that  it is serious about enforcing  the law without discrimination. The Citic Pacific case will show the world how serious we are.
Mr Yung, I look forward to your return to Hong Kong.



Citic Pacific probe a test of trust and transparency