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Friday, 20 February 2009

China banks misuse $1.38b

BEIJING - CHINESE banks and other financial institutions embezzled or misappropriated hundreds of millions of dollars last year, the country's top auditor said on Thursday.

Six billion yuan (S$1.34 billion) was misused in 20 major cases uncovered during investigations of financial institutions in 2008, Mr Liu Jiayi, auditor general of the National Audit Office, told reporters.

About half of the cases involved Industrial and Commercial Bank of China, Bank of China and Construction Bank of China, three of China's biggest state-owned banks that are also listed on the stock market, Mr Liu said.

'The auditing of the three banks and other financial institutions... will facilitate the healthy development of the stock market because it... can boost confidence by providing true, accurate and complete information to the public,' he said.

Most of the funds have been returned, although police are still investigating some of the cases, Mr Liu said.

Problems Chinese banks typically face include bank officials bending the rules for key customers or politically connected borrowers, as well as outright embezzlement.

Corruption and waste are deep-rooted problems in China, with top officials even warning that widespread graft threatens to undermine the Communist Party's grip on power.

In response to concerns over possible misuse of China's four-trillion-yuan economic stimulus package and funds allocated for rebuilding areas hit by last year's earthquake, Mr Liu said auditors will be deployed to make sure officials don't steal or waste money.

'The top priority of this year's economic work is to ensure steady and relavitively fast economic growth,' he told reporters.

China's auditor is required to audit the government's central budget, which includes the transfer of payments to the regions, official investments and use of social security funds.

President Hu Jintao has repeatedly acknowledged that corruption is one of the greatest threats to the legitimacy of the ruling Communist Party.

The government regularly announces major crackdowns on graft in official ranks in an effort to show the population that efforts are being made to extinguish corruption. -- AFP, AP

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