Xi Jinping's anti-graft campaign

China Resources sealed billions in deals without tenders, auditor finds

In one case, auditors find HK-listed power unit sealed HK$14.7b deals outside usual practice

PUBLISHED : Saturday, 21 June, 2014, 3:14am
UPDATED : Wednesday, 17 September, 2014, 6:59pm

China Resources sealed billions of yuan worth of contracts without going through a tendering process, the National Audit Office has discovered.

The revelations, part of the annual audits of 11 state-owned firms, adds weight to Beijing's call for the speeding up of reform of state enterprises.

It also wants private capital to be injected into them to improve supervision.

Several China Resources executives are already under investigation for corruption.

Units under Hong Kong-listed China Resources Power in 2012 awarded contracts for project construction and engineering works, as well as for materials and services, "by invitation" instead of open tender, the audit office said.

It did not say whether this had resulted in losses for the company by way of possible overpayment but said 586 items worth 11.7 billion yuan (HK$14.7 billion) were involved.

Sister firm China Resources Cement had failed to openly tender for coal purchases worth 6.45 billion yuan.

Analyst Keith Li, of Malaysia-based brokerage CIMB, said tendering by invitation created room for corruption, adding that it had been a common practice among mainland firms in the past.

"But since Li Keqiang became premier, the National Energy Administration has been restructured and enforcement of regulations has been tightened," he said. "Some power firms told us that even in smaller cities, enforcement is carried out by multiple officials to thwart corruption."

Meanwhile, China Resources Pharmaceutical had used an unqualified asset valuer to provide valuation for an acquisition target. The target was over valued by 66 per cent in the 1.05 billion yuan deal, the audit office said.

China Resources SZITIC Trust was found to have misused 1.3 billion yuan raised from investors by deploying it in property development projects. A further 4.1 billion yuan raised through 23 trust products sold to investors were used in the bond repurchase business instead of interbank bond investment, as intended.

Song Lin and Wang Shuaiting, both former chairmen of CRP, China Resources Capital Holdings former chief executive Wu Ding and China Resources Land's former vice-chairman Wang Hongkun have been detained in the past two months over investigation into alleged graft.