Fraudulent practices at some foreign investment banks were partly to blame for Chinese state-owned firms running up US$1.67 billion in derivatives losses last year, according to a senior official with the agency that oversees companies owned by the central government, Bloomberg reported. Li Wei, vice chairman of the State-owned Assets Supervision and Administration Commission (SASAC), made the claim in an article written for Study Times, a newspaper published by the party school of the Communist Party Central Committee. He didn’t specify which banks may have used fraudulent practices. The likes of Goldman Sachs, Morgan Stanley, Merrill Lynch and Citigroup sold derivatives products – typically contracts linked to the price of oil and interest-rate swap products – to 68 state-owned enterprises, Li wrote on November 30. He said the losses were aggravated by the complexity of the contracts, the pursuit of large profits by all parties, and poor corporate governance and risk management within the Chinese firms.
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