Audits of the listed companies' mid-year reports published by
the Shanghai and Shenzhen stock exchanges at the end of September
uncovered abuse of 57 billion yuan by controlling shareholders.
The audit of first-half earnings reports by the 837 companies
with shares traded in Shanghai found that 28.2 billion yuan (US$3.4
billion) in company funds had been taken by controlling
shareholders, the Shanghai Stock Exchange said. In addition, 180
companies had problems with shareholders illegally using listed
companies' shares as guarantees for debts. The sum involved in such
malpractice reached some 28 billion.
"The Shanghai
Stock Exchange has sent notification letters to 131 companies
inquiring about the use of funds raised, funds taken by controlling
shareholders, and their debt guarantee situations," administrators
said in a statement.
By the end of September, 64 companies had revised their
first-half earnings reports in light of the exchange's audit
results and 51 others had provided additional information.
The Shenzhen Stock
Exchange published its audit results on September 29. Of the
505 companies listed, 225 were involved in fund abuse, and the sum
involved amounted to 28.8 billion yuan.
The illegal guarantee situation is also serious among these
companies. A total of 311 Shenzhen-listed companies provided 42
billion yuan (US$5.1 billion) in guarantees. More than a third of
them -- 13.1 billion yuan's (US$1.6 billion) worth -- were
unlawfully provided.
The statements by the exchanges did not indicate how the
controlling shareholders siphoned money from the listed companies
or if it was illegal for them to use the funds. However, when large
amounts are involved, companies are required to report the
transactions.
Neither of them specified the names of those companies involved
in fund abuse or illegal guarantees. But a number of them are "ST
companies," indicating they are unprofitable, according to both
exchanges.
(China.org.cn October 9, 2004)