17 firms are targeted in fund misuse probe

CHINA’S securities watchdog has begun an investigation into 17 mainland-listed companies that allegedly misappropriated 9.2 billion yuan (US$1.15 billion) in corporate funds and failed to return the money, officials said yesterday.

China’s Securities Regulatory Commission had given the firms until the end of 2006 to make good on their debts.

The targeted companies include the Sanjiu Medical & Pharmaceutical Co, China Textile Machinery Co and Hebei Baoshuo Co.

Executives who misappropriated funds in these companies for their own benefit will be prosecuted, a CSRC spokesman said.

Officials working for at least nine of the 17 companies face criminal investigation, the commission said, without identifying the firms.

In all, 36 companies failed to meet the deadline to repay a total 14.6 billion yuan in misappropriated funds. But the other 19 companies have developed plans to recover the money and won’t face further sanctions.

Last year, 402 companies listed on the Shanghai and Shenzhen stock exchanges recovered 33.57 billion yuan that had been misappropriated by their controlling shareholders, authorities said.

The recovery campaign was aimed at improving the quality of the country’s 1,400 listed companies and safeguarding the interests of shareholders.

The misappropriation of large sums by controlling shareholders has long been a major problem afflicting China’s stock markets, officials acknowledged.

“It is a huge obstacle to the sound development of a listed company,” a commission spokesperson said.

As a result, some companies that should have enjoyed good earnings were hampered by cash-flow problems after their funds were siphoned off, the watchdog said.

On October 19, 2005, the State Council approved guidelines drafted by the regulatory commission that required controlling shareholders to return all the money they had misappropriated by the end of 2006.

In October last year, the commission also reiterated that corporate executives who misused funds must make a choice between returning the money or facing legal action.

In a related move, China’s prosecutors on Saturday vowed to intensify their crackdown on corruption, dereliction of duty and major economic crimes, Xinhua news agency reported.

“The prosecutorial organs are improving their efficiency in dealing with major corruption cases and have punished a large number of government officials,” said Jia Chunwang, procurator-general of the Supreme People’s Procuratorate.

In the last two months of the year, China’s prosecutors investigated 32,369 cases involving 38,457 officials who were accused of taking bribes or dereliction of duty. More than 17,440 cases involved large amounts of money, and 2,632 officials above the county-chief level were prosecuted or otherwise punished.

Find work for workers

More emphasis should be attached to the establishment of a long-term employment assistance mechanism, according to a commentary in Workers’ Daily. An excerpt follows:

Employment is the base of people’s livelihood. It is gratifying to see that Northeast China’s Liaoning Province recently carried out an employment relief act to help completely unemployed families.

In early 2005, the Liaoning government decided that there should be at least one person employed for every urban family in need of work. A total of 175,000 people from 143,000 families had new jobs by the end of that year. Another 34,000 families benefited from this project in the first 10 months of 2006. Now a balance has been sustained and the number of “zero-employment families” is zero. A long-term employment relief mechanism has been established. A report in People’s Daily points out that the local government has done a good down-to-earth job.

Various activities have aimed to help ordinary people nationwide in recent years, including many long-term relief mechanisms. Liaoning’s “zero-employment family” relief work is a typical example.

As the reform of enterprises deepens and labor relations adjust, some urban families are facing difficulties. Employment and re-employment have become the biggest issue for them. This is especially true as some laborers age, have no skills, or are in poor health. In some families both husband and wife have lost their jobs. Under such circumstances, it is extremely important to help them to get a job.

When completing the social security system including pension insurance, unemployment insurance and minimum-standard living insurance, governments at all levels should not forget building a long-term mechanism to promote employment. A job is always better than one-time financial relief. It would solve the problem at the root and show the government’s responsibility to concentrate on employment, activate all resources, carry out favorable policies and enable laborers to support themselves legally.