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Watchdog: CAO made 'wrong' decisions
By Xie Ye/Wang Ying (China Daily)
Updated: 2004-12-11 09:13
The State-own Asset Supervision and Administration Commission (SASAC) took
aim at the beleaguered China Aviation Oil (Singapore) Corp on Friday for
violating regulations on trading oil index futures.
It is the first time the government has commented on the financial scandal in
which CAO lost US$550 million in derivatives trading.
The oil futures trading of CAO "severely encroach the normal procedure of
decision making and made wrong business decisions that caused huge losses," said
Du Yuanquan, spokesman of the SASAC, which oversees State enterprises.
Du warned during Friday's press conference that the incident should serve as
a reminder to State enterprises.
He called for stronger supervision and risk management mechanisms to avoid
similar problems in the future.
China has allowed dozens of State companies to trade futures in selected
overseas futures exchanges. But they are strictly barred from speculative
trading.
CAO, which dominated China's jet fuel imports, racked up huge losses in
speculative trading, after it made a wrong bet on the movement of oil prices.
The company, which has applied for court protection from creditors, is
seeking strategic investors for restructuring.
On Friday, China Aviation Oil Holding Company (CAOHC), CAO's parent company,
accused CAO of covering up the information for more than a year, Xinhua News
Agency reported.
CAOHC said the slack risk supervision and management led to the violation.
Despite the incident, CAOHC said China's domestic jet fuel supply remains
unaffected.
CAOHC supplied 7.08 million tons of jet fuel from January to the end of
November, up 38 per cent from a year earlier.
Meanwhile, CAOHC is preparing to establish a new trading arm to take over
CAO's jet fuel import business.
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