Commodities such as copper, rubber, soybeans and bullion have
commonly been used in China for financing, where traders or
investors borrow against the commodity with the aim of investing the
money in high-return areas such as real estate or shadow banking.
Most such deals are legitimate, but revelations of borrowing based
on fake transactions in the gold market by the national auditor,
which comes on the heels of alleged metals financing fraud at
Qingdao Port, may prompt authorities to launch another crackdown on
Spot checks on 25 companies that process bullion, such as jewellers,
showed they made a combined profit of more than 900 million yuan by
using the bank loans to take advantage of the difference between
onshore and offshore interest rates, as well the appreciation of the
Chinese currency, according to a report published this week on the
National Audit Office's website.
Chinese firms could have locked up as much as 1,000 tonnes of gold
in financing deals by the end of 2013, the World Gold Council said
in April, indicating a big slice of imports has been used to raise
funds due to tight credit conditions, rather than to meet consumer
At current prices, that would be worth about $42 billion.
The audit report covered a period beginning in 2012 and did not
specify an end date. It did not identify any companies or banks.
The audit office also said it found problems with the country's
coal, corn and cotton reserves.
A spot check of 12 emergency coal reserve sites found that average
monthly stocks were about 30 percent lower than the target volume in
2011, and 18 percent lower than stipulated in 2012, the report said.
The quality of these reserves was also a problem.
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Some 2.43 million tonnes of cotton stocks, accounting for 27 percent
of the country's total reserves, were kept in open storage as of
June 2013, while some 70 percent of corn imported by China Grain
Reserves Corp (Sinograin) contained impurities exceeding the
stipulated 3 percent, the report said.
A reserve official at Sinograin, responsible for purchasing and
storing grain to ensure food security, was sentenced to life in
prison last year for taking 14 million yuan in bribes.
Some 110 Sinograin employees were also investigated for taking
bribes from grain retailers in exchange for awarding storage
contracts, according to reports last year by state agency Xinhua.
Beijing's anti-corruption campaign, which had focused on energy
giant PetroChina earlier this year, has begun to turn to the
commodities and mining sector.
(Reporting by Fayen Wong)
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