The state-owned listed company “Jihua Group” under the central enterprises of the Chinese Communist Party (CCP) has been subjected to the “other risk warning” for years of financial fraud, and its stock abbreviation has been changed to “ST Jihua”. According to the mainland media, the company artificially inflated its operating income by 9.66 billion yuan from 2018 to 2021, leading to penalties for the company and several then senior executives.
In the A-share market, when a stock name is prefixed with “ST”, it usually indicates financial abnormalities, information disclosure issues, or other significant risks, prompting the exchange to issue a risk warning.
According to a report from “Sina Finance” on May 20, “Jihua Group” was formerly known as the “Number One Military Supply Stock in China”, originated as a military supply enterprise under the PLA General Logistics Department. In 2006, it was transferred from the military to the local state-owned assets committee and underwent restructuring in 2009, listing on the Shanghai Stock Exchange in 2010. The company’s controlling shareholder is the emerging Jihua Group of the CCP’s central enterprises, with the actual controller being the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.
The report mentioned that Jihua Group was investigated in August 2025 for suspected violations of information disclosure laws. On the evening of April 29, 2026, the company announced that it had received an advance notice of administrative penalties. Investigations revealed that the company’s annual reports from 2018 to 2021 contained false information, with serious false reporting of financial indicators, resulting in the implementation of other risk warnings on its stock, leading to the change in the stock abbreviation to “ST Jihua”.
The investigation showed that from 2018 to 2021, Jihua Group mainly inflated or adjusted financial data through three methods: artificially inflating income and costs through financing trade operations like steel trade without commercial substance; expanding income recognition scope in certain agency businesses to boost operating income; failing to recognize revenues from land transfer cooperation and development projects in the actual attribution period, leading to distortion of financial data for the respective years. These practices resulted in four consecutive years of false reporting in annual reports, with a total inflated operating income of 9.66 billion yuan.
Regarding penalties, the announcement revealed that Jihua Group was fined 7 million yuan for four consecutive years of false reporting in annual reports; several former chairmen, general managers, chief accountants, and board secretaries were also held accountable and fined varying amounts from hundreds of thousands to millions of yuan.
The announcement stated that although Jihua Group was not forced to delist, its stock was subjected to other risk warnings due to several years of false financial reporting with serious consequences. The company also mentioned that it would retrospectively adjust relevant annual financial data.
According to a report from “China Fortune Network” on May 19, since 2026, 10 A-share listed companies have been issued risk warnings for financial fraud. The report pointed out that common methods of financial fraud by these companies include fabricating commercial trade or construction projects, cross-period revenue recognition or understating asset impairment, and falsifying fund flows.
The report also noted that many listed companies engaged in fraudulent activities for over two years. Among these companies, ST Jihua had the longest duration of falsification and the highest amounts involved in the cases.
Based on disclosed cases, some companies have engaged in long-term financial fraud, involving key personnel such as controlling shareholders, chairmen, and general managers. In addition to Jihua Group, companies like ST Dongshi, ST Hengxin, ST Ruyi, ST Derun have also faced penalties or risk warnings due to financial fraud.