FINANCE

Audits Flag Trading Irregularities and Rising Risks at Local State Firms

Published: Aug. 13, 2026 11:17 p.m. GMT+8

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The 2025 budget execution reports underscore growing operational strains at regional state firms. Photo: VCG

Recent audits in 15 Chinese provincial-level regions have revealed extensive financial mismanagement, unauthorized trading and rising investment risks at local state-owned enterprises.

The 2025 budget execution reports underscore growing operational strains at regional state firms. Several provincial-level regions, including Beijing, Jiangxi and Zhejiang, identified operational and financing risks at these companies as major concerns, alongside local government debt and risks in the financial sector.

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Unauthorized trading inflated revenue: Shandong reported $13.7 billion in non-core trades, Hubei 860 million yuan, and Zhejiang 520 million yuan irregular exposure.
Weak investment discipline: 29 projects in Shandong worth $7.7 billion failed due to poor feasibility; Gansu firms faced overseas expansion risks.
Idle assets and debt problems: Hubei left land and equipment unused; Yunnan had $83 million default; Qinghai exceeded liability ratios.

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Who’s Who

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What Happened When

As of 2025 budget execution reports：: Reports underscore growing operational strains at regional state firms, with Beijing, Jiangxi, and Zhejiang identifying operational and financing risks as major concerns.

By the end of 2025：: 12 companies had yet to transfer their required shares, while 61 of 190 companies that had completed the transfer paid no dividends, as noted in 2026 audits.

Before 2026：: Recent audits in 15 Chinese provincial-level regions began revealing financial mismanagement, unauthorized trading, and rising investment risks at local state-owned enterprises.

As of Thursday in 2026：: 15 provincial-level regions released annual fiscal audit reports for the previous year, highlighting unauthorized financing and trading to inflate revenue.

In 2026：: In Shandong, seven state-owned enterprises engaged in unauthorized commodity trading or made non-core investments totaling 92.1 billion yuan.

In 2026：: In Hubei, four subsidiaries of a state firm lent 860 million yuan through trades lacking commercial substance to boost revenue.

In 2026：: Zhejiang flagged 520 million yuan in irregular trading exposure at risk of losses.

In 2026：: Reports pointed to weak investment discipline, including inadequate due diligence and poor oversight.

In 2026：: In Shandong, 29 projects in strategic emerging industries, involving 7.7 billion yuan, were progressing slowly or failed to meet return targets due to insufficient feasibility analysis.

In 2026：: In Gansu, two state-owned companies strayed from national priorities for overseas expansion and the Belt and Road Initiative, leading to prolonged work stoppages and poor management.

In 2026：: In Hubei, state firms left large areas of land, hundreds of thousands of square meters of property, and nearly 300 pieces of equipment unused.

In 2026：: In Yunnan, one state-owned enterprise failed to refinance 610 million yuan of debt, leading to lawsuits and account freezing after an 83-million-yuan default.

In 2026：: In Qinghai, auditors warned that eight local state firms exceeded the national ceiling for liability-to-asset ratios.

In 2026：: Several provinces cited state enterprises for failing to remit required profits and state capital gains.

In 2026：: Guangdong highlighted delays in transferring state capital to replenish the national social security fund.

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