China extends graft probe into shipping industry

HONG KONG/SHANGHAI (REUTERS) - China's campaign to root out corruption has now extended into the shipping industry, after the country's largest bulk shipper, China COSCO Holdings Co Ltd , said the government was probing one of its top executives.

The shipper's vice president Xu Minjie was "under investigation by the relevant authorities", COSCO said in a brief statement to the Shanghai stock exchange on Thursday, shorthand that is used in China to describe corruption probes.

A former COSCO Group chairman, Wei Jiafu, has also been prevented from leaving China, the Beijing Times said in a report citing unidentified company sources, that was reposted by the official Xinhua news agency. Several shipping industry sources also told Reuters Wei had been banned from leaving the country.

COSCO gave no details in its statement other than to say the move would not have a big impact on the company, whose operations it said were continuing as normal. Calls to the company's headquarters seeking comment were unanswered.

COSCO shares fell by as much as 6.9 percent in Hong Kong on Friday to 9-week lows, and were set for their biggest one-day fall since early July.

Chinese President Xi Jinping has identified corruption as a threat to the ruling Communist Party's survival and has launched a sweeping campaign against it, vowing to take on both top-level "tigers" and lowly "flies".

As part of that campaign, China launched a series of graft probes into the energy sector, announcing in August and September that five former senior officials of the country's biggest oil firm, China National Petroleum Corp, were under investigation for "serious discipline violations".

The latest move comes as the Communist Party leadership prepares for a 4-day plenum on Saturday to set a reform agenda for the next decade, including the potential overhaul and increased oversight of giant state-owned enterprises (SOEs), including the likes of COSCO.

China International Maritime Containers Group Ltd , where Xu serves as a non-executive director, said in a stock exchange filing on Friday that the investigation"will not have material adverse impact" on the group because Xu was not involved in daily operations.

A Chinese shipping industry website earlier reported Xu was under investigation for corruption. The story was later removed from its website, though other Chinese news portals continued to carry it.

Xu, a shipping industry veteran of more than three decades, according to his resume on COSCO's website, is believed to be one of the first big names from China's shipping industry to be caught up in Xi's crackdown.

COSCO has been hit by a weakening global economy and a supply glut of ships since early 2011, though it appears to be on track to return to profit this year, despite analysts noting uncertainty due to lingering oversupply.

Its parent, COSCO Group, in July replaced Wei with its president and director Ma Zehua amid a downturn in the global shipping industry.

COSCO last month reported a net loss of 1.04 billion yuan (S$210 million) for July-September, according to Reuters'calculations. The company, controlled by state-owned China Ocean Shipping (Group) Co, has posted losses for two straight years. A third year would trigger a delisting from the Shanghai stock exchange.

COSCO Chairman Ma Zehua said in August that, with the global dry bulk market improving in the second half, the company was confident of turning a profit for 2013 after a narrower first-half net loss.

COSCO has this year sold its logistics business, stakes in a container manufacturer and office properties to try to return to profitability. It also controls port operator and container leasing firm COSCO Pacific Ltd.

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