March 16, 2015 / 1:20 AM / 4 years ago

China investigates auto executive, Yunnan official for graft

BEIJING (Reuters) - The chairman of one of China’s top state-owned automakers, FAW Group Corp, and a senior provincial official are being investigated for “violating party discipline”, the Communist Party said on Sunday, employing its usual euphemism for corruption.

A combination shows file photos of Xu Jianyi (L), president of Chinese company First Automotive Works (FAW), smiling during a ceremony in Wolfsburg April 23, 2012 and Qiu He, deputy head of the party of Yunnan province, at a discussion in Beijing November 9, 2012. REUTERS/Fabian Bimmer (L) and Stringer/Files

After taking over as party and military chief in late 2012, President Xi Jinping declared war on corruption at all levels in China, vowing to go after powerful “tigers” and lowly “flies”. Scores of senior officials have been brought down by the campaign, including former security tzar Zhou Yongkang.

Xu Jianyi, 61, chairman of state-owned China FAW Group Corp, and Qiu He, 58, deputy head of the party in southwestern Yunnan province, are being investigated for “serious violation of (party) discipline and laws”, the party’s Central Commission for Discipline Inspection said on its website. It gave no further details.

FAW Group Corp, which counts Faw Car Co Ltd as one of its units, is one of China’s biggest automakers which has joint ventures with Volkswagen (VOWG_p.DE), Toyota and General Motors in China.

Faw Car shares fell as much as 5.6 percent to more than a two-week low. The news also hit its other units with Tianjin FAW Xiali Automobile Co Ltd down as much as 3.6 pct and Changchun Faway Automobile Components Co Ltd declining as much as 2.2 pct.

Both Xu and Qiu hold a rank equivalent to a cabinet vice minister.

Qiu is well-known in China for ambitious projects and his autocratic and eccentric management style, demanding discipline from his staff. Once seen as a political rising star, his style won both praise and criticism.

Foreign automakers seeking to manufacture cars in China must form joint ventures with domestic partners and are restricted to 50 percent ownership limits, an arrangement generally seen as the cost of doing business in the world’s largest car market.

Such requirements expose companies to unknown risks at their JV partners and extend beyond the auto sector. Founder Securities, a joint venture partner of Credit Suisse AG, had assets frozen after accusations of embezzlement and its chairman later disappeared.

Caixin, a weekly magazine, said Qiu is being investigated for urban construction projects in Kunming, provincial capital of Yunnan, when he was the city’s party boss from 2007 to 2011.

China’s top prosecutor told the annual full session of parliament that prosecutors investigated 4,040 civil servants at the county level or above in 2014, or an average of 11 a day. The 11-day meeting ended on Sunday.

Reporting by Benjamin Kang Lim; Additional reporting by Jake Spring; Editing by Raissa Kasolowsky/Ruth Pitchford and Michael Perry

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