China’s Questionable Funds Exceeds Billions

April 20, 2009 10:26 pm Last Updated: October 1, 2015 9:53 pm

This file photo shows Communist Party delegates attending the opening session of the National People's Congress (NPC) in Beijing, an annual event for one of the world's largest rubber-stamp legislatures. China's National Audit office uncovered over 4 bill (FREDERIC J. BROWN/AFP/Getty Images)
This file photo shows Communist Party delegates attending the opening session of the National People's Congress (NPC) in Beijing, an annual event for one of the world's largest rubber-stamp legislatures. China's National Audit office uncovered over 4 bill (FREDERIC J. BROWN/AFP/Getty Images)
China's National Audit Office announced the result of its first auditing project on April 17. By October 2008, the audited departments had recovered US$3.8 billion worth of funds. Fifty three central regime departments have been found involved in illegal fund operations up to US$4 billion. Lead of 116 suspected criminal cases were sent to procuratorates and judiciary departments. Thirty people have been arrested, prosecuted or sentenced, and 117 have been penalized.

US$4 Billion Worth of Questionable Funds

The results from inspecting the central regime's budget implementation shows that there were US$4 billion dollars of questionable cash involving 53 central regime departments. However, US$2.4 billion was due to flaws in budgeting and paperwork, and could be solved by combining financial reform and new budgeting arrangements. Out of the remaining US$1.6 billion, 71.1 percent of it has been returned to its proper use.

Part of the Fund Completely Lost

The Audit Office announced that the audited departments had recovered US$3.8 billion worth of funds, but part of the lost fund was impossible to recover. For example, in 2007, the office audited three businessmen formerly in charge of state enterprises while they were in office. It found illegal operations that caused huge loss of state assets. By October 2008, US$1.4 million of the assets were recovered; US$1.25 million off-the-book accounts were taken care of, and US$10 million was being pursued through legal processes. The rest of the US$69 million was lost because the three responsible employees fled the country.

China Everbright Bank, People's Insurance Company (Group) of China, and China Reinsurance (Group) Corporation had corrected 95.3 percent of the problematic funds (US$2.3 billion) found by the Audit Office; US$106 million was in the process of being corrected, while US$7 million was lost.

By the end of October 2008, US$28 million of abused relief funds were recovered, while US$9 million were unable to be recovered due to financial difficulties.

Questionable Fund Involved Land Taxes

According to the Audit Office, by the end of October 2008, local regime has had recovered US$1.9 billion of land levy that had been diverted, unpaid, or owed; US$42 million of land requisition compensation and social security for relocated farmers; and returned US$263 million of diverted loans for land reserves. The amount of land funds recovered accounted for more than half of the total questionable fund.

In the audit report of 2007, people in many cities illegally avoided placing land taxes. The amount involved was close to US$28.6 billion.

Agricultural Bank of China Investigates 2,673 Employees

Based on the Audit Office's report, Agricultural Bank of China had the largest number of people involved in the problematic funds. In 2007, to respond to Audit Office's report, Agricultural Bank punished 2,673 responsible employees. In the case of Zheng Fenglai, associate director of Jinzhou city division in Liaoning, and Liu Fude, director of Heishan County division, who embezzled US$443 million of bank assets, the Agricultural Bank penalized 186 people.

The bank that punished the most number of high level officials is the China Development Bank. Ten out of 22 penalized staff were bureau-level cadre.

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