China Zhongwang Holdings has attacted controversy again by lending 2.3 billion yuan to a local government-owned building company in Liaoning, reveals the South China Morning Post.
The Post says the troubled aluminium giant disclosed the loan in a footnote to its 2009 annual results. According to the newspaper, firm borrowed 2.3 billion yuan from two Liaoning banks and gave the money to Hongwei, which invests in construction projects.
"Zhongwang is standing in the middle between unnamed local banks and a government-owned construction company, for no obvious commercial purpose, casting further doubt on its corporate governance. The company claims it is not liable, but if that was the case at the year-end, then why is the loan and debt on its balance sheet?" shareholder activist David Webb told the Post.
An analyst who follows the firm commented that the loan was "incredibly strange".
He also advised: "Minority shareholders should question this, as well as other aspects of Zhongwang's corporate governance record."
The firm posted its first set of results with the Hong Kong stock exchange on Tuesday. The press conference that had been scheduled to accompany the results release on the same day was cancelled.