PwC among auditors enlisted by China to probe state firms’ offshore assets
Beijing enlists seven firms, including PwC, to investigate projects and holdings this year
Beijing has appointed seven audit companies, including international firm PwC, to look into the overseas assets of major state-owned enterprises as it tightens the reins on the business giants.
The State-owned Assets Supervision and Administration Commission (Sasac) said yesterday that three of the audits would cover the offshore assets of various state firms, and four would be into key SOE projects, Xinhua reported, without giving further details.
The seven audits would be carried out this year, Sasac said.
It will be the first time that the state asset regulator has investigated offshore assets and follows state media calls in March for the authorities to assess the trillions of yuan in the firms’ offshore holdings.
“There are concerns about whether these investments are economically effective,” Beijing Jiaotong University professor Zhao Jian said. “A thorough auditing is needed to evaluate their effectiveness.”
Zhao said the audits would also help the authorities uncover misconduct by government officials and corporate bosses.
The audits come just under a decade after Beijing urged state-owned firms to pioneer the country’s go-global campaign as part of its efforts to encourage capital outflow to ease soaring inflation.
But worries soon surfaced as the firms scrambled for acquisition targets and splashed out billions of US dollars to set up production facilities overseas.
That spending resulted in “white elephants” that were suspected hotbeds for corrupt activities.
In March, Dong Dasheng, a former deputy auditor general of the National Audit Office, was quoted by Xinhua as saying that the 4 trillion yuan (HK$5 trillion) in offshore assets held by the state-owned giants were virtually unaudited.
He said all the state-owned assets, including those overseas, should be audited every one or two years.
He said that corrupt company executives could take advantage of regulatory loopholes to embezzle or misuse funds to enrich themselves during reorganisations, acquisitions, disposals and signings of major offshore projects.
The audits signal a deepening of President Xi Jinping’s anti-corruption drive, which has already netted a swathe of high-ranking officials.
Last year, two executives involved in the Canadian operations of China National Petroleum Corp, Song Yiwu and Li Zhiming, were detained by Chinese authorities.
Financial news outlet Caixin reported in July that Jia Xiaoxia, general manager of CNPC’s subsidiary in Canada, could be tied to former security tsar Zhou Yongkang . It added that Jia’s whereabouts were not known.
“It won’t be a surprise if serious corruption and decadent officials are spotted [through the audits],” said Frank Ye, chief executive of Canadian IT service provider Acentury. “In many cases, you won’t be able to win outsourcing deals from China’s SOEs unless you have connections with their relatives.”
