Government auditor finds irregularities among 17 SOEs

A government audit uncovered illegal activities at 17 of China’s state-owned enterprises, leading to the punishment of 87 officials, state media reported. The central government audit office said 97% of the flaws it discovered have been corrected and 87 officials “seriously handled.” Companies alleged to have engaged in financial legerdemain include CITIC Group, Baoshan Iron and Steel Company (Baosteel; 600019.SH), China Merchants Group, China Telecom (CHA.NYSE; 728.HKG). Auditors determined that Industrial and Commercial Bank of China (ICBC; 601398.SH, 1398.HKG) had lent around RMB9.5 billion (US$1.5 billion) to unqualified projects and entities, and discovered irregularities in RMB1.5 billion (US$236 million) worth of loans to individuals. Auditors also said China Petroleum and Chemical Corporation (Sinopec; SNP.NYSE, SNP.LSE, 600028.SH, 386.HKG) and PetroChina (PTR.NYSE, 601857.SH, 0857.HKG) underreported 2010 profits by RMB1.4 billion and RMB1.5 billion, respectively.