China would tighten supervision of State companies with operations overseas, part of an effort to prevent abuses and control risks following the near bankruptcy of the country‘s main jet fuel supplier due to speculative trading, domestic media reported Wednesday.
Executives of companies that violate regulations and endanger their companies‘ assets will receive “strict punishment,” the China Daily cited Li Rongrong, the head of the ministry in charge of overseeing State assets, as saying.
China began tightening controls over major State companies after China Aviation Oil, listed in Singapore, late last year declared losses of US$550 million from risky oil trades and sought court protection from creditors in Singapore’s most serious financial scandal in nearly a decade.
The company and its former chief executive officer, Chen Jiulin, are facing a criminal investigation in Singapore. In China, authorities have blamed the debacle on lax enforcement of rules against speculative dealings.
“The Central Government has urged all central State-owned enterprises to learn lessons from this case and take positive and effective measures to strengthen supervision,” said Li, who heads the State-owned Assets Supervision and Administration Commission.
There are 690 companies overseas with assets totaling 629.9 billion yuan that fall under the control of state-companies administered by the State Council, the report said.
Li said the government was investigating how many of those companies had been involved in high-risk business activities, such as derivatives trading, and is drafting rules to better control their operations, it said. No details were given.
China has been restructuring State-controlled industries to help make companies internationally competitive and stem losses. Smaller factories are being closed, while larger ones are being merged into massive industrial conglomerates.
Li reported that the overall performance of State companies had improved, with combined profits for those in which the government was the majority shareholder rising 48 percent year on year in 2004 to 728 billion yuan (US$88.03 billion).
(Source: Shenzhen Daily/Agencies)