When Chinese anti-corruption authorities took down the head of the state-owned enterprise Jiuquan Iron and Steel Corporation (JISCO), the firm’s exorbitant reception expenses came into focus under the public lens.
On May 6, the Communist Party’s anti-graft agency in Gansu Province announced that JISCO’s chairman and deputy Party secretary Feng Jie had been placed under investigation on charges of “severe violation of law and discipline.”
Details about Feng’s case were not released, but JISCO’s so-called “reception expenses”—paid for by public funding, have come under scrutiny. According to the state-run China Business News, in 2014 the company allocated over 1 billion yuan (about $160 million) to cover receptions, a threefold increase from 2011.
For state-run firms like JISCO, “reception expenses,” along with overseas business trips and vehicle procurement and maintenance, are covered by state funds.
These provisions allow for loopholes that executives can easily take advantage of. In 2013, Feng Jie spent 76 million yuan ($12 million) on a luxurious reception office in Beijing, despite his company suffering annual losses of 3 billion yuan, China Business News reported. The building was supposedly intended for receiving officials and company staff travelling to Beijing for business.
