(Adds graft-fighting official investigated for corruption)
By Benjamin Kang Lim and Megha Rajagopalan
BEIJING May 9 China is auditing the State Grid
Corp of China, the utility said in the wake of a magazine report
that one of the most senior executives in the world's largest
utility was under investigation.
Caixin, a respected Chinese business magazine, reported this
week that Zhu Changlin, head of the State Grid's North China
operations, was under investigation, leading industry and
government sources to believe State Grid could be next in line
in the government's campaign against graft.
It was unclear if the investigation of Zhu, which could not
be independently verified by Reuters, was related to the audit.
In a statement via its microblog on Thursday, the State Grid
called the audit "routine".
"This economic accountability audit is a routine audit
arranged according to our systems," it said without giving
The statement added that State Grid was one of 14 major
state-owned enterprises, including seven energy-related
companies, being audited.
Industry sources told Reuters that State Grid Corp. - which
transmits and distributes power to 1.1 billion people across
nearly 90 percent of China - was the central target of this
round of audits.
The goal of the audits into State Grid and other firms is
unclear, but industry officials said it was unlikely that
auditors would emerge empty-handed.
"They will definitely uncover a bunch of problems, big or
small, from an audit of any big state-owned enterprises," said a
senior Chinese power industry official.
The audit, which started last month, has sparked investor
concerns that the government may consider breaking up State
Shares of State Grid subsidiaries that produce power
equipment, including Henan Pinggao Electric Co Ltd
and XJ Electric, have fallen sharply in the past
month. The subsidiaries rely on State Grid's spending on ultra
high-voltage power transmission projects to bring in revenue.
Investors are also worried about an investigation into State
Grid Chairman Liu Zhenya, a strong proponent of the
controversial ultra high-voltage technology.
Liu says the technology would revolutionise long-distance
power transmission and help resolve China's geographical energy
imbalance, but critics say the technology is costly and
untested, and could make the system vulnerable to black-outs.
President Xi Jinping has vowed to target powerful "tigers"
as well as lowly "flies" in a fight against corruption that he
has said threatens the Communist Party's very existence.
On Friday, the government announced that Wei Jian, a senior
official with the party's graft-fighting Central Commission for
Discipline Inspection, was himself being investigated for
serious violation of discipline and law, the usual wording use
for a corruption investigation. It gave no details.
PetroChina <601857.SS >, and its parent
firm, China National Petroleum Corp (CNPC) are at the centre of
one of the biggest corruption investigations into the Chinese
state sector in years.
In March, the chairman and the president of Three Gorges
Corp., the company that built the $59 billion project for the
world's biggest hydro-power scheme, stepped down, but they have
not been accused of any wrongdoing.
The party's anti-graft watchdog published a scathing report
in February saying some Three Gorges' officials were guilty of
nepotism, shady property deals and dodgy bidding procedures. The
dam was funded by a special levy paid by all citizens.
But analysts say a central purpose of the anti-corruption
campaign may be to consolidate Xi's power and remove opposition.
"It is a way to strengthen control," said Johnny Lau, a Hong
Kong-based political analyst. "We cannot expect that Xi Jinping
will take action against corruption only because he wants to
make things clean. There is a hidden agenda."
(Additional reporting by Li Hui and Ben Blanchard, and by
Charlie Zhu in HONG KONG; Editing by Simon Cameron-Moore and