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Print Edition> Nation
UPDATED: May 16, 2011 NO. 20 MAY 19, 2011
Extravagance of Reputation
Liquor scandal at Sinopec exposes the absence of effective supervision on state-owned enterprises

Absent checks

The extravagant liquor bills are only part of a spate of scandals hitting the state-owned Sinopec in recent years.

In July 2009, online postings claimed Sinopec had splashed out 12 million yuan ($1.85 million) on a crystal hanging lamp installed in its Beijing headquarters. The company said later the lamp actually cost about 1.6 million ($246,000).

In February of this year, the company was embarrassed by disclosures that it had ordered its own employees to post online comments supporting fuel price hikes in disguised identity.

Recently, Sinopec was also reported to have bought land in Beijing at an extremely low price and to have run a five-star hotel on it without a license. In 2006, a company of Sinopec spent 50 million yuan ($7.70 million) to buy land in Beijing's Shunyi District for the construction of Heyuan Royal Garden at about 1,000 yuan ($154) per square meter, one eighth the price of a nearby residential project, according to The Economic Observer business weekly.

The hotel's owner, Beijing Heyuan Royal Garden Hotel Co., is a company affiliated with Sinopec's service subsidiary, the report said.

The company did not sign a land transfer deal with the Ministry of Land and Resources until last September, the newspaper said, although the hotel opened for business in 2008.

"The ministry allows companies to pay additional fees to obtain rights of a land if they have used the land otherwise than formerly stated," the newspaper said citing insiders. "It is usually a measure to avoid land auctions and obtain land at low prices."

The hotel's website says the building covers 40,273 square meters, but the whole area is 700,000 square meters, including 500,000 square meters of forest.

"The land price is shockingly low if the forest is counted as the hotel's amenities," The Economic Observer said.

Mao Shoulong, a professor at Renmin University of China, said no matter what forms of extravagance, squandering huge amounts of public money on lavish dinners, exotic liquor or other expensive commodities, they are all a kind of abuse of power and the money of the public. "Abuse of power is another form of corruption," he said.

"Since the top leaders of SOEs are appointed by the Central Government to run the companies on behalf of the state and the people, there is no reason for them to consider themselves the boss with the power to spend as much money as they like," Mao said.

Most SOEs, especially the ones listed on the stock market, are supposed to have a board of directors. The money they earn belongs not just to the state and the people in the broader sense, but also to whoever buys their shares.

"In this sense, the squandering of company money on liquor by the top managers of Sinopec's Guangdong branch is not just a violation of the rules, but an infringement upon shareholders' interests as well," Mao said.

Premier Wen Jiabao has repeatedly lashed out at wasteful spending as a source of corruption and widespread public discontent since he took office in 2003.

But, without proper checks and balances and greater transparency, talks about reining in extravagant spending by officials and SOE executives seldom turn into action.

"At the time that governments at all levels are under heavy pressure to make public their accounts, it is more than necessary for SOEs to be open about their non-production expenses," Mao said. "The lavish liquor expenses in Sinopec Guangdong branch this time should be a reminder that a mechanism is needed to keep SOEs' top executives seriously in check."

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