Japanese trading giant Mitsubishi Corporation has decided to cease domestic metal trading operations in China following a suspected fraud by a copper trader, resulting in a reported loss of 13.8 billion yen ($87.5 million). According to various media reports, the loss was recorded during the July to September quarter and stemmed from a client defaulting on payment in a copper trading deal. This incident marks a significant breach of trust within the company's Chinese trading activities.

Mitsubishi disclosed that a trader based in Shanghai was found to be involved in the fraudulent activity. Following an internal investigation, the individual was dismissed, and criminal charges have been filed against them, as per the several media reports. The company described the trader's actions as a severe violation of trust. This revelation has prompted Mitsubishi to reassess its metal trading operations in China, though specific details about these changes remain unclear, including whether its subsidiary, Mitsubishi Corporation RtM China, will be shut down.

While Mitsubishi estimates that the operational changes in China will result in costs of under 1 billion yen, the company plans to continue conducting metals business with Chinese clients through alternative channels. These include its global mineral resources trading hub, Mitsubishi Corp RtM International, based in Singapore, and its domestic unit in Japan.

The decision to halt domestic metal trading in China underscores the challenges faced by Mitsubishi in maintaining robust internal controls and trust in its trading operations within the region. Despite this setback, Mitsubishi’s continued engagement with Chinese clients through other entities reflects its commitment to sustaining its metals business while mitigating risks associated with direct operations in China.

This incident highlights the complexities of operating in international trading markets and the critical importance of rigorous oversight. Mitsubishi’s swift response, including the dismissal of the trader and filing of criminal charges, signals its intent to uphold integrity and transparency within its business practices. The company’s decision to restructure its operations demonstrates a strategic effort to address vulnerabilities and reinforce its global trading network.

By leveraging its resources in Singapore and Japan, Mitsubishi aims to maintain its presence in the Chinese market while ensuring greater accountability and oversight in its operations. Moving forward, the company is likely to focus on enhancing its compliance measures and strengthening its internal controls to prevent similar incidents from occurring in the future.