$1 bn stolen in China low-cost housing programme: govt

$1 bn stolen in China low-cost housing programme: govt

Friday, August 9, 2013 – 17:24


BEIJING – China’s affordable housing programme lost nearly $1 billion to embezzlement last year, the national auditor reported on Friday, underscoring the obstacles to official efforts to fight graft. About 5.8 billion yuan ($950 million) went towards “loan repayment, foreign investment, land requisition and house demolitions, office cash flow and other expenses not related to affordable-housing projects”, the National Audit Office said on its website.A total of 360 projects or organisations “embezzled” the funds, it said.

Housing costs – which have spiralled in recent years despite government controls – have become a sensitive issue as ordinary Chinese find themselves struggling to afford a home.

China plans to build 36 million affordable-housing units from 2011 to 2015 and the programme received almost 880 billion yuan last year, the audit office said, constructing 5.9 million units and assisting 9.5 million families.

But 110,000 families produced false documents to qualify for assistance unfairly, it added.

The state news agency Xinhua warned at the start of the year that tackling corruption in the affordable housing programme was “increasingly urgent.”

“Many Chinese have become extremely sensitive to skyrocketing housing prices and any mishandling of housing resources,” it said in an editorial.

House prices averaged 10,300 yuan per square metre in July, according to the independent China Index Academy, up 7.9 per cent year-on-year, an acceleration from 7.4 per cent in June.

China’s new leadership took office in March pledging to work harder to root out graft and improve people’s livelihoods.

Among the spate of scandals exposed in their anti-corruption campaign in recent months, several low-ranking officials have been reported to own multiple homes, sometimes in the dozens.

China Finds Abuses Nearing $1 Billion in Affordable Housing Push

A Chinese audit concluded that about 5.8 billion yuan ($947 million) was misappropriated from an affordable-housing program that Premier Li Keqiang said would provide a test of the government’s credibility.

Funds from 360 projects were diverted to pay back loans or make outside investments, while money designated to pay for demolitions was used to start other construction, the National Audit Office said in a report posted on its website yesterday.

The five-month audit’s findings draw new scrutiny to a program that was designed to reduce the risk of real-estate bubbles and ease discontent among the poor. In February 2012, when Li was vice premier, he called on the public to supervise the government’s push to distribute affordable housing in a fair way.

In 2012, the government invested 412.9 billion yuan in affordable housing, while another 466.8 billion yuan came from bank loans, bonds and other social financing, according to the report. The real amount of money that was lost may be higher than reported, Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, said in a phone interview.

“If there’s any surprise it should be that it’s so small,” Du said of the abuses. “This is probably a deflated number.”

Li’s predecessor as premier, Wen Jiabao, pledged in 2011 that the government would build as many as 36 million affordable-housing units within five years. The audit found that 38,900 units had been distributed in violation of the rules, and abuses included people providing false information and families receiving multiple houses.

Advertising Costs

In one case cited by the audit, a property company in the Inner Mongolia city of Ordos spent money meant for affordable housing on advertising and sales expenses for property projects. The money was later returned, it said.

The report said local governments had paid “great attention” to problems pointed out by the auditors.

“Overall, the situation is quite good, but the audit found that there exist problems of violating the rules and substandard management in some affordable-housing projects,” it said.

Before becoming premier in March, Li had championed affordable housing as a way to stabilize the housing market and boost supply.

“Fair distribution of the houses is the lifeblood for the success and sustainable development of the program,” Li said in February 2012, according to the official Xinhua News Agency.

Almost 20,000 auditors were deployed to 31 provinces from November to March to check the program’s progress, yesterday’s report said.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: