80% of Chinese gov’t office purchases above market price, with 70% of purchases at least 1.5 times higher

80% of Chinese gov’t office purchases above market price: report

Staff Reporter

2013-02-27

Around 80% of office products and equipment purchased by Chinese government departments last year were above average market value, with 70% of purchases at least 1.5 times higher, reports the Guangzhou-based 21st Century Business Herald.

The results were part of a new report from the Chinese Academy of Social Sciences, one of the top think tanks in Asia, which surveyed contracted prices of more than 110,000 items purchased by governments in four Chinese provinces between Jan. 1 and Sep. 30, 2012.

Excluding special necessities such as equipment for the police and fire departments, the survey found that 79.9% of purchases were higher than the market price. It also found that 70% of the purchases were at least 1.5 times market price, though only 1.8% of were three times higher or more. Twenty-two of the products were found to be a remarkable 6-37 times above average retail prices.

Among the most ridiculous was a computer retailing for 2,600 yuan (US$425) that was recorded as having been purchased by a local government for 98,700 yuan (US$15,800). Most of the significant overpayments were on products such as portable hard drives, camera equipment, computer memory and projector light bulbs.

The total number of overpriced products acquired by the Chinese government during the surveyed period reached 15,190 products valued at a total of 79.3 million yuan (US$12.7 million). This represented overspending of around 20.74 million yuan (US$3.3 million).

The academy said it met with significant local government opposition during its investigations, with only the provinces of Guangdong, Heilongjiang, Jiangxi and Fujian willing to participate. Other areas either refused information requests completely or refused to divulge product model numbers, purchase volumes or prices.

Experts say the results demonstrate that government purchases in China are in dire need of more transparency and uniform purchase standards. The country’s Ministry of Finance showed it might be heading in the right direction when it placed seven restrictions on the acquisition a new printer for the office that eliminated all the super high-end models, although most other government departments do not have such standards.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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