BEIJING, June 18 China's $575-billion sovereign
wealth fund mismanaged some of its overseas investments between
2008 and 2013 that led to losses, the country's top auditor said
on Wednesday, without specifying the size of the loss.
The National Audit Office said some employees in China
Investment Corp (CIC) did not conduct adequate due
diligence before investing in 12 overseas projects in the last
The CIC employees subsequently also failed to track the
performance of these investments, it said.
The fund also breached regular procedures when it hired
external managers for a few of its foreign projects, the report
In addition, several CIC units within China, such as Central
Huijin, China Jianyin Investment, China Investment Development
Co and China Zhongtou Trust Co, were also found to have
irregularities in their businesses.
These include breaking away from their core businesses and
venturing into the real estate sector, and funding illegal
Created in 2007, CIC is tasked to help China invest its
$3.95 trillion-and-growing foreign exchange reserves. But
because of the mammoth size of China's national savings, the
government has formed other domestic funds that rival CIC in the
hope of further improving investment returns.
CIC reported an annual return of 10.6 percent in 2012,
reversing from 2011's loss of 4.3 percent. Its cumulative
annualised return since inception is 5 percent.
The state auditor also released separate reports about Bank
of China, the country's fourth-largest bank, and
Agricultural Development Bank of China, a state-owned bank that
supports the government's farm policies.
The auditor found that six Bank of China
branches disbursed 6.4 billion yuan ($1.03 billion) of loans
that violated China's lending policy in the past 10 years. It
did not say if it conducted similar checks at other bank
Three other Bank of China branches were also found to have
made 3.2 billion yuan worth of loans between 2009 and 2012 to
businesses that were not involved in genuine trade.
China's policymakers try to control how much banks lend a
year by telling banks when and how much to lend, and whom to
Similarly for Agricultural Development Bank of China, the
auditor found that the bank made a total of 6.8 billion yuan
worth of "irregular" loans by relaxing its lending rules in the
six years to 2012.
The report said the Agricultural Development Bank had also
disposed of 1.5 billion yuan worth of non-performing loans in
the past five years through "irregular" means. No details were
Bank of China and Agricultural Development Bank issued
statements on their websites on Monday and Wednesday
respectively in response to the audit result, saying they had
rectified the wrongdoings and measures have been taken to
prevent risks from irregular loans.
CIC did not immediately respond to a request for comment.
($1 = 6.2090 Chinese Yuan Renminbi)
(Reporting by Aileen Wang and Koh Gui Qing; Editing by Kim