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CITIC Pacific chief steps down

THE chairman of conglomerate CITIC Pacific, the Hong Kong arm of a Chinese government investment company, resigned yesterday amid a scandal over currency losses, becoming China's highest-profile corporate casualty of the global financial crisis.

Chairman Larry Yung stepped down after Hong Kong police raided the company's office last Friday as part of a probe into wrong-way bets on foreign currencies that may cost the company US$2 billion, CITIC Pacific said.

Managing Director Henry Fan was also leaving.

"Mr Yung believed that his resignation would be in the best interests of the company," the firm said in a statement to the Hong Kong stock exchange.

Chang Zhenming, a vice chairman and president of the company's Beijing-based parent CITIC Group, was named as new chairman and managing director.

Yung is the son of former Vice President Rong Yiren - who was once dubbed the "red capitalist." Yung has been listed among the richest people in China with a fortune estimated at some US$3.7 billion by Forbes magazine in 2007.

CITIC Pacific - a vast conglomerate whose dealings run from airlines to mining and Wal-Mart stores - stunned the market last year when it revealed massive losses from hedging contracts on foreign currencies, notably the Australian dollar, that turned sour amid the financial crisis.

The company was forced to seek a US$1.5 billion bailout from CITIC Group, the Chinese Cabinet's main investment company. The losses have triggered protests, outrage among investors and separate investigations from securities regulators and police, amid allegations the company knew of the problems weeks before telling the market.

Last Friday, Hong Kong police, investigating allegations of false statements made by the company's directors and conspiracy to defraud, executed a search warrant at the firm's Hong Kong headquarters to obtain information about currency contracts and company announcements.

Last month, CITIC Pacific reported a HK$12.7 billion (US$1.6 billion) net loss for 2008 - the company's first annual loss in years.


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