China's national auditor finds investment irregularities at 11 state companies

China's national auditor finds investment irregularities at 11 state companies

BEIJING - China's National Audit Office has found irregularities at 11 state-owned conglomerates ranging from misrepresentation of assets to illegal property development, highlighting the challenges the government faces in overhauling the public sector.

China National Petroleum Corp (CNPC), the parent of PetroChina Co Ltd , China Resources (Holdings) Co Ltd, the parent of 10 companies listed in Shanghai and Hong Kong, and defence contractor China South Industries Group Corp, were among the firms whose 2012 audit reports were released on Friday.

China has been moving to overhaul its state-owned sector following last year's decision to diversify ownership to give equal political and legal status to state and private companies. In recent months, the government has launched a series of pilot programs aimed at experimenting with new management and ownership structures.

The central government, which directly controls 113 enterprise groups, has also been trying to reduce corruption and waste at its biggest companies, and pushing them to pay higher dividends.

Among the reports released on Friday, the auditor said China Metallurgical Group Corp - one of the country's biggest engineering contractors - lacked offshore feasibility studies and failed to obtain government approval for three investments alongside Pakistani, Australian and US companies, which led to cumulative losses of more than 3 billion yuan (S$602 million).

At China South, poor management of foreign investment in 17 overseas companies resulted in accumulated losses at seven firms of $138 million, the auditor said.

For CNPC, a loan by subsidiary Bank of Kunlun Ltd of 570 million yuan to a Xinjiang-based company without proper due diligence or post-loan management was at risk of total loss, as of July 2013, the auditor said.

Some 190 company officials at the 11 conglomerates "were dealt with severely", including 32 bureau-level cadres, the audit office said in a separate posting on its website.

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