May 19, 2021 05:34 PM

Corruption Dragnet Snares Another Top Official at Regional Steelmaker

A fourth top official at steelmaker Kunming Iron and Steel Group Co. Ltd. has been caught up in an anti-corruption dragnet at the company, spotlighting the weak corporate governance often seen at big state-owned enterprises in China’s less-developed areas.

Dong Ruizhang, a vice president and member of the company’s Communist Party standing committee, was being investigated for “serious violations of discipline,” a phrase that almost always refers to corruption, according to a Monday announcement on the website of the party’s disciplinary body in Southwest China’s Yunnan province where the company is based.

Simultaneously, the Central Commission for Discipline Inspection (CCDI) announced that 25 managers from the company had admitted to having “problems,” but were either not punished or received light punishment.

The latest developments bring the number of people caught up in the corruption probe at the company to 43 to date, Last month, the CCDI disclosed that the company’s party secretary and Chairman Du Lujun, as well as vice presidents Li Ping and He Zhijun were among 17 people at the company and its various units being investigated.

Kunming Iron and Steel is among China’s many regional steelmakers that were once local crown jewels but have lately become more of a burden for their local governments due to their inefficiency and poor management. To tackle the problem, Beijing is currently coordinating a campaign to consolidate the sector — which produces half of the world’s output — around a few major players.

One of those, China Baowu Steel Group Corp. Ltd., is emerging as the clear leader, and announced in February it would acquire Kunming Iron and Steel.

The CCDI unit investigating the Kunming Iron and Steel case said in an article published Tuesday that it would continue to probe the company for more corrupt officials.

A reshuffling of top executives at the company has taken place since the scandal was unveiled last month, with Baowu installing one of its own executives as chairman and another as a vice president and member of Kunming Iron and Steel’s party standing committee.

Kunming Iron and Steel is Yunnan’s largest steelmaker, with net assets worth 64.8 billion yuan ($10.1 billion) as of last September. The company has annual capacity of 7.2 million tons of iron and 8.3 million tons of crude steel. But it is still a relatively small potato in the empire of Baowu, which passed ArcelorMittal last year to become the world’s biggest steel producer by passing the 100 million ton milestone for annual production.

Reflecting its business difficulties, partly due to its small size, Kunming Iron and Steel reported a net loss of 367 million yuan in the first three quarters of last year. But last week Baowu announced the company had returned to profitability by posting a 230 million yuan profit in April.

Contact reporter Yang Ge (geyang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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