Sinograin cuts nearly 9,000 entrusted storage depots: can a radical self-reform cure the root problem?

The audit results recently released by the National Audit Office are a heavy blow for China Grain Reserves Corporation (Sinograin). The audit report disclosed that in 2013, Sinograin exposed many management loopholes and caused huge losses.

After the release of the National Audit Office report, quite coincidentally, on June 30, Sinograin's official website reposted an expert article titled “Giving play to Sinograin Corporation's role of using a small force to move a heavy load” (hereinafter referred to as the “expert article”). This article is highly informative, and it is noteworthy that it revealed that in order to improve storage conditions and reduce management risks, Sinograin sharply compressed its entrusted storage depots from more than 10,000 to more than 1,000.

According to a previous report by China Business News, Sinograin has been repeatedly exposed by the media in recent years, which is in fact the inevitable result of “a small horse pulling a big cart.”

Sinograin undertakes the enormous task of market-supporting purchases and storage of policy-related grain. Although Sinograin is currently the largest grain storage enterprise in China, it has only more than 50 billion jin of storage capacity, equivalent to about 0.25 billion tons. Taking 2014 as an example, the policy-related grain purchased that year was about 1.25 billion tons, far exceeding Sinograin's storage capacity to take in all policy-related grain.

Sinograin had no choice but to cooperate with storage enterprises outside its system, which concealed a large number of risks. How to supervise entrusted storage depots across the country is a difficult problem.

Many entrusted storage depots are supervised by Sinograin's directly affiliated depots, while Sinograin does not have many directly affiliated depots across the country.

According to the above-mentioned expert article, as of October 2014, Sinograin had integrated 753 directly affiliated depots under the jurisdiction of 23 branch companies into 346 central depots. Whether it was the later 346 central depots or the original 753 directly affiliated depots, supervising the original more than 10,000 entrusted storage depots could only be described as beyond their reach and beyond their capacity. It is not surprising that supervision became a mere formality.

In April this year, CCTV's “News Live Room” program reported that Qingyunbao Central Grain Depot in Kaiyuan City, Liaoning Province, and Qianguo Bayilaga Purchasing and Storage Depot in Songyuan City, Jilin Province, had the problem of “replacing old grain with new grain” in grain purchasing and storage. It was later ascertained that the above two depots were respectively a private depot leased by Sinograin and a local state-owned grain depot entrusted by a directly affiliated depot. The above cases proved the difficulty of supervising entrusted storage depots.

The National Audit Office report disclosed that from 2012 to 2013, due to inadequate control by subordinate units such as the Henan Branch and Luohe Directly Affiliated Depot, problems such as grain shortages in storage depots and inconsistency between quality and price occurred in grain stored at storage depots, causing losses of 785 million yuan, a mechanism of 189 million yuan in the original text, and in which 495 million yuan was in 2013.

After sharply compressing nearly 9,000 entrusted storage depots, Sinograin's regulatory pressure will improve markedly. However, the root cause of the problem still remains. If more than 100 million tons of policy-related grain continue to be purchased in large quantities every year, Sinograin, as the main body implementing the policy, will have to rely on units outside its system, and the entrusted storage depots that have already been compressed may rebound.

Moreover, the scale and intensity of grain purchasing and storage are not decided by Sinograin. In 2014, China's grain output achieved an “eleventh consecutive increase,” and in 2015 China's grain output is expected to create a “twelfth consecutive increase.” At the same time, China's grain imports exceeded 100 million tons, also setting a historical record. How to ensure the objective effect of the enormous grain purchasing and storage deserves serious reflection.