China Railway Group: Global Giant Under Scrutiny Over Subsidiary Corruption

 

The recent collapse of the State Audit Office (SAO) building in Thailand, triggered by a 7.7 magnitude earthquake, has placed a spotlight on the building's safety standards and, consequently, on the construction company involved: China Railway No.10 Engineering Group, a subsidiary of the infrastructure behemoth, China Railway Group (CREC).

 

This incident has prompted a closer examination of CREC's global operations, particularly concerning allegations of corruption and bribery within its international subsidiaries.

 

China Railway Group, a state-owned enterprise, is a major player in infrastructure development, both domestically and internationally.

 

Its subsidiaries, each identified by a numbered designation, manage projects worldwide.

 

For example, while No.10 is under scrutiny in Thailand, other subsidiaries like No.9 operate in regions including Saudi Arabia, Malaysia, and Uganda, and No.8 handles projects in Iraq, Singapore, and Laos. CREC also plays a significant role in China's "One Belt, One Road" initiative.

 

Despite the ongoing investigation into its subsidiary in Thailand, China Railway Group boasts an impressive record. It has been a consistent presence in the Fortune Global 500 for 17 years, ranking 34th in 2022.

 

The company is also listed on the Shanghai and Hong Kong stock exchanges, although its share price has seen a 5% decline since the Myanmar earthquake.
 

 

Infrastructure Powerhouse with Global Reach

China Railway Group is responsible for the construction of over two-thirds of China's railway network, including 90% of its electrified lines. It has also contributed significantly to the nation's expressway and urban rail transit systems.

 

The company's diverse portfolio encompasses railways, highways, municipal utilities, and large-scale infrastructure projects worldwide.

 

The group's technological prowess is well-documented. It claims leadership in bridge construction and tunnelling, and holds numerous patents and national awards for scientific and technological progress.

 

However, this reputation is juxtaposed with allegations of corruption and bribery involving its subsidiaries operating overseas.

 

 

Allegations of Corruption and Bribery

China Railway Tunnel Group (CRTG), another subsidiary of CREC, has been implicated in bribery scandals. In October 2023, two senior CRTG officials were convicted of bribing Singaporean government officials.

 

Furthermore, former China Railway Corporation head, Sheng Guangzu, was sentenced to 15 years in prison for accepting substantial bribes.

 

In 2012, reports surfaced regarding the arrest of a general manager from China CREC Railway Electrification Bureau Group on bribery suspicions.

 

These incidents have raised concerns about the company's oversight of its international operations.
 

 

 

Financial Performance and Market Reaction

China Railway Group's financial results for the first half of 2024 indicate a decline compared to the previous year.

 

Revenue fell by 7.8% to 544.522 billion yuan, gross profit decreased by 8.2% to 46.757 billion yuan, and net profit attributable to shareholders dropped by 12% to 14.279 billion yuan.

 

The recent earthquake and subsequent scrutiny of its subsidiary have contributed to market volatility, with the company's share price experiencing a notable decline.

 

As investigations continue, the international community will be closely monitoring China Railway Group's response to these allegations and the potential impact on its global projects.