Jan 7 2014, 4:29am CST | by Forbes
The death of the president of China Railway Group Ltd. may be tied to the recent anticorruption campaign, reported 21 st Century Business Herald, a Guangdong-based newspaper. Bai Zhongren, who had been in charge of the state-owned railway giant since 2010, jumped from the building where he lived on Jan. 4. The company dropped 4.1%, the most in six months, to close at HK$3.75 on Jan 6.
The 21st Century Business Herald, citing anonymous sources working in China’s railway sector, said Bai’s death may be related to the ongoing anticorruption campaign that led to the downfall of Liu Zhijun, China’s former railway minister who was given a suspended death sentence in July for abuse of power and taking bribes. Under Liu’s tenure, China’s railway builders were mired in debt, waste and embezzlement. China Railway Construction Corp.Ltd., the country’s second largest infrastructure contractor, spent 837 million RMB ($135 million)on hospitality in 2012. A year earlier, the National Audit Office found officials embezzled 187 million RMB ($28 million) from just the Beijing-to-Shanghai portion of the high-speed railway project.
Caixin, an investigative journal based in Beijing, reported that the central government is stepping up its efforts to root out corruption in the railway sector. The publication, also citing anonymous sources, said corruption problems of railway projects will soon be exposed in a “bigger scale” and managers of the railway sector are under immense pressure.
China Railway didn’t confirm local media reports. It said in an online statement that Bai’s leadership is a “significant” contribution to the company and his death is a “huge” loss. The company said its operations remain normal as Chairman Li Changjin will assume Bai’s responsibilities. On Dec 31, China Railway announced a $9.6 billion deal to build a 250-mile railroad linking a steel facility in northern Cambodia to a port in the southern part of the country.
Infrastructure projects are a big part of China Railway’s business. According to Bloomberg, infrastructure construction accounted for more than 80% of the company’s revenue as of end of June. Its other operations include consulting, property development and finance trust. As of September 2013, the company has a total asset of 626.5 billion RMB ($103.5 billion), and total debts of 531.6 billon RMB ($87.8 billon), with a debt ratio of 85%. Local media reported that some subsidiaries don’t have sufficient funds to pay salaries. In an online statement, the company said its debt ratio is normal among China’s railway companies and the risks are manageable.
Source: Forbes Business
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