In Chinese folklore the celestial ‘being’ responsible for administering justice to the immoral and corrupt is Leishen, the god of thunder. However, the story goes that Leishen wasn’t much good at his job in the early days, often thunderbolting the wrong person because he couldn’t see properly in the dark. So the Jade Emperor married him off to one of Leishen’s innocent victims, Dianmu. She became the goddess of lightning, identifying the right targets through bolts of her own from the heavens.
Over the past few weeks, the Chinese press have been deploying thunder-related analogies for the storm roiling Sasac-controlled power equipment maker Shanghai Electric and (at least) 10 other listed companies. The subtext: Dianmu’s lightning bolts would be very useful in illuminating “dirt concealed in hidden corners where the sun doesn’t shine”, as NetEase News puts it.
WiC has written about many corruption scandals over the years. The full cost of this one isn’t apparent yet, with media calculations running from Rmb25 billion ($3.86 billion) to Rmb90 billion.
What makes the case especially unusual is the sheer number of companies involved from the state sector (or SOEs). To date, it’s culminated in two arrests at Shanghai Electric and the suicide of company president Huang Ou, who jumped from the roof of his apartment building in Shanghai on August 5.
Huang had already tried to kill himself the previous Friday by slashing his wrists. Three days before his first attempt, Shanghai Electric’s chairman and Party head, Zheng Jianhua, was arrested for suspected graft.
The first hint that something was amiss came in April with the arrest of Lu Yachen, former chairman of a subsidiary firm, Shanghai Electric Communication Technologies (SECT). The following month the Shanghai and Hong Kong listed parent issued an alert warning that it had “gradually discovered” that Rmb8.3 billion of net income was at risk because four clients of SECT hadn’t made payment on time. In early June, it issued legal claims against the four latepayers to recover half of the overdue receivables, citing Nanjing Changjiang Electronics and China Electronics Corp as the two largest debtors.
A number of other companies then began to acknowledge that they were exposed to bad debt too. They included: Hongda Chemical, Guorui Technology, Zhongtian Technology and Kaile Technology.
So far one common link has been uncovered – a man called Sui Tianli, who controls a little-known company that has the second largest stake (28.5%) in SECT (Shanghai Electric holds 40%).
Sui, who is also connected to many of the other interested corporate parties either as a shareholder or director, seems to have set up a complicated network of deals and payments. Companies owned by him would offer to pay a 10% deposit for goods (mostly for products related to network communications), while the SOEs in question were required to source the raw materials for the contracts from other companies also owned by Sui.
Having been required to pay the suppliers in full upfront, the SOEs then failed to receive the balance on the finished items from the end clients, despite delivering the goods.
Jiemian.com wonders why they “agreed to such absurd terms” in the first place, although one unnamed company explained that it was taken in by Sui’s “aura”. Jiemian notes that Sui sat on the panel of a high-profile national innovation contest, claimed to be the director of a national research institute and was previously employed by the military-backed China Electronics, one of the companies that Shanghai Electric is suing.
According to a statement from his own company, Sui cannot be reached but is being investigated by the authorities.
Making the scandal more embarrassing is that Shanghai Electric is a lynchpin in China’s Belt and Road Initiative, as well as a contributor to its drive for a greener future as a major player in wind power (see WiC542).
Many questions remain unanswered. Where have the missing billions gone? Was Sui acting alone? And why did Shanghai Electric agree to lend SECT huge sums of money before news of the shortfall was made public?
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