SHANXI Coal International Energy Group is suing the company at the center of the alleged metals financing fraud at the Qingdao port and its parent for more than US$177 million in missed payments the two had guaranteed, a move that suggests the scandal is starting to affect other sectors in China.

    Shanxi Coal, one the country’s top producers, said in a statement Friday it was suing three clients over the missed payments as well as Decheng Mining and its parent, Dezheng Resources, and another firm that had acted as guarantors.

    Shanghai-listed Shanxi Coal’s exposure to Decheng came as a result of complex transactions which are typical of commodity financing and the common business practice of inter-company loans in China.

    Goldman Sachs estimated in March that commodity-backed deals account for as much as US$160 billion, or about 30 percent of China’s short-term foreign-exchange borrowing.

    Shanxi Coal said it had agreed with Decheng in 2012 to act as its import agent for alumina, aluminum ingots and refined copper through Citic Australia Commodity Trading. The shipments were sold to two Hong Kong-registered companies, with Decheng and its sister company as guarantors.

    In another deal, it signed a contract to buy alumina from Decheng, which was then sold to local firm Qingdao Yida Mining Ltd., with Dezheng Resources also being one of the guarantors.

    “Big State companies often act as import agents for smaller firms because they have easy access to credit. When you look into these deals carefully, it’s clear that they play an essential role in shadow lending,” said an analyst who declined to be identified.

    Many large companies in China engage in the practice because of the better and quicker returns they can get, compared with their primary business. (SD-Agencies)