State-owned conglomerate and Fortune 500 company China Resources is under investigation after state media journalist Wang Wenzhi accused senior executives of corruption and wrongdoing last month from his Sina Weibo account. Wang’s allegations, pointed at China Resources chairman Song Lin, concern a 7.9 billion yuan acquisition of a majority stake in three Shanxi mines previously valued at half that price. Earlier this week, the South China Morning Post reported that Li Jianjun, an independent investigator from Shanxi province who had accused China Resources of corruption prior to Wang Wenzhi’s headline-breaking Weibo activity, would be bringing his collected evidence to investigators in Hong Kong:
An independent mainland investigator with ambitious plans to topple the chairman of one of the country’s largest state-owned conglomerates with corruption charges has announced he would visit Hong Kong’s top anti-graft bodies on Monday and turn over evidence on alleged mismanagement, negligence and corrupt activities involving dozens of senior corporate executives.
[…]Li has said Song was responsible for pushing through suspicious deals in which China Resources Power, one of the group’s Hong Kong-listed subsidiaries, purchased several coal mines in Shanxi for more than 10 billion yuan (HK$12.6 billion), times more than the mines’ real value.
[…]In dozens of media interviews, Li and Wang have said they have reliable sources well-informed of the allegedly illegal activities within China Resources and promised to unveil more “explosive” evidence as investigations in Beijing and Hong Kong progress.
[…U]nlike the Xinhua journalist, Li, who now calls himself a media consultant and investor, makes no secret about his personal stakes in releasing information on this particular case.
He learned about the alleged corrupt deals behind the coal-mine sales while investigating some long-term “enemies”, powerful government officials and businessmen in his home province of Shanxi, who had financial interests in the mines, Li said. By bringing it to public attention, he wanted to “take down” key figures on both the selling and buying ends of the deal. [Source]
As the investigation continues, the deal that hurdled the company’s alleged corrupt practices into the spotlight is expected to soon be completed, at Beijing’s behest. Again from the South China Morning Post:
The controversial 7.9 billion yuan mining rights deal at the heart of corruption allegations against state-backed China Resources Power is expected to be completed in 20 days.
[…]The source, who declined to be identified due to the sensitivity of the issue, told the PostBeijing had weighed in to ensure local government officials in Shanxi – where the mines are located – sign permits that should have been inked a year ago. CRP will pay the remaining 3.7 billion yuan (HK$4.6 billion) once they secure the mining rights. It has already paid 4.2 billion yuan.
[…]By completing the deal, the management hopes to send out a message that the company’s overall business strategy will not be affected by the controversy. [Source]
The New York Times details the ongoing controversy, looking closely at the Shanxi mine deals, China Resources’ history, the role of state-owned enterprises (SOEs) in China’s economy, and at how this highly publicized case is fueling concerns about their power:
The controversy over the coal deal has made China Resources a lightning rod for criticism of all state-owned enterprises, which produce about two-fifths of the nation’s economic output.
[…]“Chinese shareholders have been treated like little lambs being slaughtered,” said Li Jianjun, a Chinese journalist who has taken up the accusations against Chinese Resources. “Companies like this need to be taught a lesson.”
[…]In the late 1990s, Zhu Rongji, then the prime minister, pushed hundreds of thousands of state-owned enterprises into the private sector, but the 120 or so largest of these businesses had the political muscle to resist privatization.
Instead they won official backing as pillars supporting the state’s role in the economy. They gained wealth and influence over the last decade, partly from their almost unlimited access to low-interest loans from state-owned banks. […] [Source]
In talks of reform shortly after becoming China’s premier, Li Keqiang mentioned that “the government should give markets greater room to operate, including allowing private businesses to compete on an equal footing with state-owned enterprises,” but as mentioned by the New York Times, “party insiders and economists have said […] the issue of state-owned enterprises is so contentious that a party leadership meeting in the fall is likely to put off any big decisions.” For more on SOEs see “Just How Powerful Are China’s State-Owned Firms,” via CDT. Also see a recent article from the Financial Times drawing attention to a conspiracy theory “floating around Beijing political circles”: both China Resources and GlaxoSmitheKline China (also undergoing investigation for graft) previously had children of Hu Yaobang among their high-ranking executives.