March 2, 2018 / 8:21 AM / a year ago

China's CEFC taken over by Shanghai government agency: SCMP report

BEIJING (Reuters) - A Shanghai government agency has taken control of CEFC China Energy, the private firm that has agreed to buy a $9.1 billion stake in Russian oil major Rosneft (ROSN.MM), the South China Morning Post (SCMP) reported on Friday.

FILE PHOTO: A CEFC logo is seen at CEFC China Energy's Shanghai headquarter in Shanghai, China September 12, 2016. REUTERS/ Aizhu Chen/File Photo

SCMP cited two unidentified sources with direct knowledge of the matter saying Shanghai Guosheng Group, a portfolio and investment agency controlled by Shanghai’s municipal government, had taken over management and daily operations.

SCMP did not give a reason for the move.

Reuters and other Chinese and international media reported this week that CEFC Chairman Ye Jianming had been investigated for suspected economic crimes. CEFC denied this and Friday’s report, saying operations were running as normal.

If confirmed, CEFC would be the second company in the past week to be seized by China’s government, which wants to curtail big-spending conglomerates in a crackdown on financial risk.

The Chinese government took control of Anbang Insurance Group Co Ltd [ANBANG.UL] on Friday and said its chairman had been prosecuted for economic crimes.

A CEFC spokesman said on Friday the firm had not been informed of any takeover and CEFC China Energy management was still in charge. On Thursday, CEFC denied reports about Ye’s investigation, saying they “had no basis in fact” and the company was “operating normally.”

Shanghai Guosheng did not answer calls seeking comment.

Reports of the probe put pressure on shares in CEFC Anhui International Holding (002018.SZ), a Shanghai-listed subsidiary of CEFC, sending them 3.9 percent lower on Friday after a 10 percent fall the previous session, the maximum allowed in a day.

A major Chinese ratings agency downgraded another CEFC unit, CEFC Shanghai International Group, and trading in that unit’s bonds were halted.

Other Chinese conglomerates with major overseas assets have also come under government scrutiny in recent months, buffeted by shifting policy winds. These include HNA Group, the parent of Hainan Airlines, Dalian Wanda, Fosun and others that had once been encouraged by the government to invest abroad.

Shanghai Guosheng, set up in 2007, is an investment arm of the Shanghai government that has invested in state-owned Commercial Aircraft Corp of China Ltd (COMAC) and has stakes in state firms such as Bright Food and Guotai Junan Securities.

According to its website, the agency aims to “promote the integration and reorganization of various resources, capital and assets” and “actively participate in the reorganization and adjustment” of state-owned assets and enterprises.

Reporting by Josephine Mason and Aizhu Chen in BEIJING, Julie Zhu in HONG KONG and John Ruwitch in SHANGHAI; Editing by Christian Schmollinger and Edmund Blair

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