Getting shafted

Investigators to look at murky coal deal

Song Lin w

In the public eye: Song Lin

“The pen is mightier than the sword” was a phrase first coined by Edward Bulwer-Lytton in his 1839 play Cardinal Richelieu. The drama was a study in administrative power, but the maxim now tends to be regarded by newspaper reporters as a professional mantra: encapsulating how investigative journalism can check abuse by governments and other powerful entities.

For Americans this style of journalism reached its apogee with the newspaper reporting of Bob Woodward and Carl Bernstein on the Watergate scandal. But in current day China ‘the pen’ has more of an online feel, thanks to the internet and the Twitter-like service Sina Weibo.

And while not yet on a par with bringing down Richard Nixon, some pretty big scalps are being had by journalists using weibo.

The trend began with amateur bloggers outing the activities of corrupt local officials (posting photos of bureaucrats wearing Swiss watches and such like). But it took a new twist late last year when a senior editor at a prominent magazine took to his widely-read weibo to accuse the deputy director of the NDRC, the powerful economic planning body, of graft (see WiC195). The Caijing journalist’s source was the official’s ex-mistress and initially the story was met with blanket denials. Then there was silence until mid-May when state media reported that the official in question, Liu Tienan, had been dismissed and would face punishment for “serious disciplinary violations”, the Party’s preferred jargon for corruption.

Last week there was a fresh stir, when another senior journalist took to his weibo to cry foul too. This time it generated even more attention: the accusation has been made against a prominent state-owned firm and its bosses, but the writer is also a chief correspondent for Economic Information Daily, which is part of Xinhua.

Wang Wenzhi addressed his weibo posting to the Party’s Central Commission for Discipline Inspection: “I hereby report that the vice-ministerial level official China Resources Chairman Song Lin and other senior officials deliberately manipulated the acquisition of Shanxi Jinye Group assets in 2010, resulting in billions of yuan in losses in state-owned assets. The acts of Song Lin and other relevant officials involved in the acquisition constitute misconduct and are suspected of huge corruption.”

The case that Wang was addressing has been discussed before. Other media had looked into the Jinye deal, with WiC first citing it in issue 187. It had involved one of Shanxi’s richest coal barons, Zhang Xinming, whose subsequent whereabouts soon proved mysterious. Of the 10 coal assets Zhang had sold to Hong Kong-listed China Resources Power, two did not even belong to his company, one held exploration rights that had expired, and the largest mine needed its licence renewed, according to China Business Journal.

Nor was the deal a cheap one, at Rmb7.9 billion ($1.28 billion).

Although it wasn’t exactly a scoop, Wang’s accusations on weibo reignited interest in the case. Specifically, Wang said China Resources Power paid Rmb5 billion more for the coal assets than the value assigned by Datang Coal – another potential bidder – just three months earlier. Following Wang’s broadside, China Resources Power’s shares fell 15.6% in Hong Kong over the next two days.

The company has denied Wang’s allegations (describing them as speculation and slander). But China Resources is already in trouble over the transaction with minority shareholders, who are furious that an acquisition of this size wasn’t adequately disclosed. Six key shareholders have brought the matter to Hong Kong’s high court, where it will be heard early next month. According to China Business News, the stockholders are suing 20 current and former directors of China Resources Power, based on the price paid for “flawed” assets.

The impact of all the bad news has started to spread to other areas of the business too. On Monday, the company’s shareholders rejected China Resource Power’s proposed merger with China Resources Gas Group. Separately, its controlling shareholder Sasac (see WiC45) has started an investigation into the Jinye deal.

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