Beijing pursues probe into railway mess

PUBLISHED : Friday, 08 April, 2011, 12:00am
UPDATED : Friday, 08 April, 2011, 12:00am


The central government has discovered irregularities in some railway tenders and is investigating further, Li Changjin, chairman of China Railway Group, one of the country's two dominant state-owned rail construction firms, said yesterday.

But at a press conference yesterday, Li (pictured) declined to answer questions on whether his company was being probed or whether the management was affected by the corruption investigation into former railways minister Liu Zhijun. Liu was dismissed in February. 'Liu Zhijun is being investigated, but I'm not clear about the details,' said Li.

The Hong Kong- and Shanghai-listed company's orders suffered a year-on-year decline in the first quarter, because some rail projects failed to meet tender requirements and did not receive approval from mainland authorities, while other rail projects were delayed, Li said. 'Now the government is very strict on land sales for rail projects.'

On March 25, Premier Wen Jiabao said officials and vested interests must be banned from illegal involvement in tendering for projects, and called for tighter supervision of project tendering.

'There exist severe problems in the bidding for construction projects. We must step up efforts to investigate illegal behaviour by officials. Currently, Liu Zhijun is being investigated for a suspected serious breach of discipline,' Wen told a State Council anti-graft meeting.

China Railway is conducting its own investigation in reaction to a recent report on the Beijing-Shanghai high-speed railway by the National Audit Office, said Li.

The audit report disclosed a range of problems including embezzlement, improper tendering and fake procurement receipts. The report said subsidiaries of China Railway started construction on 4.45 billion yuan (HK$5.28 billion) of projects, including a bridge on the Beijing-Shanghai high-speed railway, before tendering began.

But China Railway's chief financial officer Li Jiansheng said the company started on some projects ahead of the tendering because it was better to start construction on projects that take a longer time like a bridge, ahead of other sections to avoid delays. 'The auditors are ignorant of the railway tendering process. We were just following orders from the Ministry of Railways to start work on the bridge early.'

The audit report said China Railway Construction Corporation (CRCC), the other leading state-owned rail construction firm, which is also listed in Hong Kong and Shanghai, won 490 million yuan of contracts to renovate railway stations along the Beijing-Shanghai high-speed rail line in a tendering process that excluded other potential bidders.

A CRCC spokesman said tendering was the responsibility of the project owner, not CRCC.

China Railway's internal investigation found it had received 26 million yuan of fake receipts mainly for procurement of gravel, Li Changjin said. 'We have replaced all 26 million yuan of fake receipts with real receipts.'

This is part of the 324 million yuan of false procurement receipts involving China Railway, CRCC and China Communications Construction (a port construction firm) mentioned in the audit report on the Beijing-Shanghai high-speed railway.

China Railway did not create false receipts, but unknowingly received them, said Li Jiansheng. 'We're the victim. It's difficult to verify the receipts.'

Separately, CRCC called for better detection. 'Cracking down on fake receipts is the government's responsibility. We need to raise our ability to detect false receipts,' a CRCC spokesman said.

China Railway also said it would cut capital spending to 15.9 billion yuan this year from 19.2 billion yuan in 2010 and 18.5 billion yuan in 2009, partly because the amount of build-operate-transfer projects on the mainland will drop this year, said Li Jiansheng.

Irregular tracks

Amount of projects, in yuan, in which China Railway subsidiaries started construction before tendering began: 4.45b yuan