When Wang Yifang was replaced as chairman of Hebei Iron and Steel Group, he left behind a loss-making company in crisis, riddled by embezzlement and wasteful spending.
Hebei province deputy governor Zhang Jiehui chaired a company meeting on last Monday to announce the provincial government had replaced Wang with Yu Yong as chairman.
At the meeting, Yu told senior management of serious problems in the company and his objective of seeing it back in profit by 2015, according to the group's website.
The following day Wang submitted his resignation as chairman of Hebei Iron and Steel Company, the Shenzhen-listed subsidiary of Hebei Iron and Steel Group, due to "work changes", the firm announced.
Yu said a large amount of cash, resources, and profits in some subsidiaries had been embezzled, the group's website said.
Without naming anybody, Yu said many employees had treated the company as "a paradise for making personal fortunes", even though some subsidiaries were reliant on loans to survive.
The problems are widespread and have existed for a long time," Yu said. "The resulting loss of funds is very shocking."
The group's operations and finances had reached an extremely difficult stage, Yu said. "Hebei Iron and Steel will definitely create a worthy image of itself befitting its status as the world's second-biggest steel company and China's largest."
Although the Shenzhen-listed subsidiary is profitable, its net profit plunged 68.2 per cent to 116.92 million yuan (HK$148.29 million) in the first three quarters.
"The Chinese government wants steel companies to be more profitable. Hebei Iron and Steel Group is not as efficient as other large state-owned steel companies like Baosteel," said Sarah Wang, an analyst with Masterlink Securities.
Separately, Liang Jingli, the chairman of state-owned Guangxi Liuzhou Iron and Steel (Group), is under investigation for "severe violation of discipline", by the government of Guangxi Zhuang Autonomous Region, the firm's Shanghai-listed subsidiary, Liuzhou Iron and Steel, said on December 3.