China's State Administration of Grain (SAG) on Tuesday ordered local grain authorities in Northeast China to thoroughly investigate several companies after a media report alleged that a major grain company swapped out fresh grain for expired grain to sell and pocketed the price difference for profit.
The inspection will mainly target State-run grain storage companies - China Grain Reserves Corp (Sinograin), COFCO Group, Chinatex Corporation, and grain bureau of Xinjiang Production and Construction Corps, according to an announcement on the administration's website.
The announcement came after China Central Television (CCTV) reported on Friday that several grain depots, affiliated with Sinograin, in Jilin and Liaoning provinces were substituting expired grain for new grain.
In response to the report, Sinograin said on its website Friday that they will set up a team to investigate CCTV's allegation. The company said it will cooperate with local authorities in the investigations. No results are available to the public yet.
A person close to the Sinograin investigation and who refused to be named told the Global Times Tuesday that the Sinograin investigation result may not be fair if the company has a leading role in the probe, unless government officials get more involved as well.
SAG's announcement called for a severe crackdown on activities such as replacing newly harvested grain with old grain, buying old grain for discounted prices and reselling it for high prices, and manipulating grain prices via fake transactions.
These practices are common in the country's grain industry, the person close to the investigation said, noting that some grain vendors in China can usually make profits of about 100 yuan ($16.13) per ton by reselling old grain.
Cao Baoming, a professor from Nanjing University of Finance and Economics, agreed with the unnamed person's opinion.
Sinograin fully controls China's grain market, making it possible for the company to carry out illicit transactions during grain trading, Cao told the Global Times Tuesday.
"SAG should enhance its supervision of the market," said Cao.
Sinograin could not be reached by press time. Sinograin bought and sold 2.59 billion tons of grain in 2014, an increase of 15 percent compared with 2013, according to the company's website.
Sinograin invested 102 new depots in 2014, aiming to store 4.55 million tons of grain, People's Daily reported in February.