600200’s Four-Year Financial Fraud Scandal: The Mounting Pressures Behind China’s Crackdown on Corporate Misconduct

*ST Su Wu (600200.SH) faces mandatory delisting after regulators uncovered four consecutive years of systematic financial fraud, exposing staggering RMB 17 billion in undisclosed related-party transactions. This landmark case exemplifies China’s intensified regulatory scrutiny over corporate malfeasance following the 2025 Joint Supreme Court-CSEC Guidelines.

The Anatomy of a Systematic Fraud Scheme

The China Securities Regulatory Commission (CSRC) investigation revealed elaborate falsification tactics spanning from 2020 to 2023. *ST Su Wu engineered sham trade operations specifically designed to bypass compliance protocols.

Revenue Inflation Mechanism

The company created circular trade flows with shell entities, artificially boosting financial metrics:

• 2020: RMB 495M falsified revenue (26.46% of total)
• 2021: RMB 469M falsified revenue (26.39% of total)
• 2022: RMB 431M falsified revenue (21.26% of total)
• 2023: RMB 377M falsified revenue (16.82% of total)

Undisclosed Related-Party Transactions

A complex web of unauthorized fund transfers emerged totaling RMB 16.93 billion by December 2023 – equivalent to 96.09% of net assets. These off-book transfers violated multiple disclosure requirements under CSRC Regulation No. 182.

Concealed Control Structure

Investigators discovered undisclosed control by Qian Qunshan since February 2018, contradicting annual reports citing Qian Qunying as controller. This deception violated Section VII of China’s Securities Law.

Regulatory Crackdown Dynamics

The Shanghai Stock Exchange invoked Article 12.5.3 of the Listing Rules to qualify the violations as “major illegal conduct,” triggering mandatory delisting procedures.

Immediate Market Consequences

Following July 14th announcement:

• Trading automatically suspended during review
• Superimposed delisting risk warnings activated
• Mandatory disclosures every 5 trading days

The RMB 10M penalty mirrors precedent cases like Luckin Coffee’s SEC settlement, though China’s 2025 guidelines now require proportional compensation for harmed investors.

Broader Market Implications

CSRC’s “delisting does not exempt liability” policy signals heightened accountability:

• 35 delisted firms faced enforcement actions in 2024
• Pending shareholder lawsuits exceed RMB 1.2B
• Controlling shareholders retain repayment obligations

New Regulatory Enforcement Framework

The May 2025 Supreme Court-CSEC Joint Guidance prioritizes four mechanisms:

1. Strengthened whistleblower protections
2. Collective litigation pathways
3. Cross-agency investigation protocols
4. Mandatory compensation escrows

Audit Reform Imperatives

The accounting disclaimer on *ST Su Wu’s 2024 audit underscores gaps in auditor independence requirements. Reform advocates cite the need for mandatory audit firm rotation as seen in SEC counterpart regulations (2023).

Investor Protections Moving Forward

Affected shareholders can seek compensation through:

• Securities litigation under Article 85
• CSRC mediation facilities
• New fast-track claims processes

This case underscores regulators’ shift toward proactive detection via big data surveillance of transaction patterns. Investors must prioritize fundamental analysis – particularly trade receivable anomalies – ahead of regulatory flags. Engage your brokerage’s forensic accounting teams quarterly to safeguard positions against evolving fraud.