Recently, both Funeng Oriental and Guizhou Bailing were subjected to Other Risk Warnings (ST) due to false records in their annual reports.
Funeng Oriental disclosed in an announcement that the company will be placed under an ST designation because its 2020 and 2021 annual reports contained false records. Simultaneously, it received a "Prior Notice of Administrative Penalty" from the Guangdong Securities Regulatory Bureau proposing a fine of 6.5 million yuan. According to the facts stated in the prior notice from the China Securities Regulatory Commission, the aforementioned financial metrics involved false records in items such as operating revenue, total profit, net profit, and asset or liability accounts on the balance sheet.
The issues at Guizhou Bailing are more severe. Not only did the financial fraud span four years (2019, 2020, 2021, and 2023), but the company also failed to recognize current period selling expenses based on the accrual accounting principle and the matching principle of revenue and costs. This led to understated selling expenses from 2019 to 2021, resulting in cumulative profit inflation exceeding 650 million yuan and cumulative profit reduction exceeding 450 million yuan through improper recognition of selling expenses.
This public opinion incident points to failures in both companies' internal governance and financial internal control systems. Funeng Oriental's case involves false records across multiple financial metrics like operating revenue and total profit, directly impacting investors' ability to assess the company's true operational status. Guizhou Bailing's problems are more systematic. This practice of adjusting profits according to "need" not only violates accounting standards but also exposes severe deficiencies in the company's governance, where supervisory mechanisms are ineffective and internal controls are seriously lacking.
It is noteworthy that such financial fraud is not an isolated occurrence. According to the "Q2 2025 Listed Company ESG Risk Report" republished by Sina Finance, governance-related risk events accounted for the highest proportion (797 incidents). Among these, financial fraud disclosure violations reached 204 cases, constituting 52% of all disclosure violation incidents, and have become a "malignant tumor" eroding trust in the capital market.
From an ESG perspective, these events represent failures within the "Governance (G)" dimension. According to core ESG rating standards, the essence of governance lies in the standardization of a company's internal management mechanisms, the authenticity and transparency of information disclosure, and the protection of shareholder rights. The actions of these two companies have breached this fundamental baseline.
The ESG rating scores for Funeng Oriental and Guizhou Bailing can be queried on the Sina Finance ESG rating platform.
According to the latest rating results from the domestic renowned rating agency HuaZheng Index on October 31, 2025, Funeng Oriental received an ESG rating of CCC. It ranked 391st among 492 A-share listed companies in the machinery manufacturing industry, placing it in the lower-middle tier. Breaking down the dimensions, the total governance (G) score was only 72.02 (B). Although the governance rating was slightly higher than the environmental dimension, this incident of false financial disclosure directly impacts key scoring indicators in the HuaZheng rating system, such as "governance risk," "disclosure quality," and "external penalties," which may lead to a decline in the governance dimension score.
The domestic renowned rating agency CSI Index's latest ESG score for Guizhou Bailing is a B rating, placing it in the lower-middle range among 265 A-share listed companies in the pharmaceutical industry. The CSI ESG evaluation system includes nearly 200 indicators, with governance dimension factors like "compliance management," "authenticity of information disclosure," and "executive accountability constraints" accounting for over 30% of the weight. The severe violation involving four years of financial fraud and cumulative profit manipulation exceeding 600 million yuan constitutes a "major controversial event" as defined by CSI ESG and is likely to result in a decrease in the overall governance rating.
For listed companies, false financial information can mislead investors' decisions, leading to investment losses and infringing upon shareholder rights. Trust from all stakeholders, including customers, suppliers, and creditors, will plummet sharply.
To regain stakeholder trust, the aforementioned companies need to implement stricter financial accounting and auditing processes, ensuring absolute rigidity in the application of accounting standards. They should also establish a list of related parties and a real-time monitoring system for fund transactions. Any non-operational fund transfers must be approved by a special committee where independent directors constitute the majority and be disclosed immediately. Furthermore, establishing regular compliance training and audit systems is essential.
To accurately and promptly track corporate ESG performance and assess the potential impact of ESG-related public sentiment, the Sina Finance ESG Rating Center has introduced an "ESG Impact Level" with standardized qualitative criteria. It assigns four levels for positive ESG sentiment (Excellent, Good, Medium, Minor) and four levels for negative ESG sentiment (Severe, Serious, Medium, Minor).
