The collection and use of social maintenance fees have become a hotbed of rent-seeking and corruption in China

Audit Finds Rampant SMF Irregularities

10-08 14:47 Caijing

The collection and use of SMFs have become a hotbed of rent-seeking and corruption, and a convenient source of income for corrupt officials.

By staff reporters Shu Taifeng and Li Qiyan

The findings of a recent audit by the National Audit Office (NAO) of the management and usage of social maintenance fees (SMFs) were published Sept. 18, which is a first since SMF came into being 11 years ago. The partial audit of one municipality, eight provinces and 45 counties took stock of SMFs local governments collected from 2009 through May 2012, which totaled US$ 2.81 billion.According to the official definition, SMF, a compulsory charge that has been the subject of heated debate since China implemented its family planning policy, is charged on Chinese families that have more children than allowed by law. As a compensatory administrative charge collected by local governments, SMF is meant to compensate for the additional demand for public facilities and additional consumption of natural resources.

A source at the National Health and Family Planning Commission put the total amount of SMFs collected nationwide, which has never been published previously, at tens of billions of yuan.

The NAO’s report disclosed a wide range of irregularities in connection to SMF, including arbitrary collection standards, embezzlement, and retention of SMF revenue. For example, a grassroots family-planning official at a village in southwestern Yunnan Province deposited collected SMFs into his personal account and used the money for personal expenses.

Other malfeasant practices are more common among local family planning authorities. SMFs are routinely held back, to be handed out to local family-planning officials in the form of bonuses, or to be used to cover reception costs. Moreover, some local family-planning authorities run “secret funds” with retained SMF revenue by collecting SMFs in cash without giving a receipt.

Wang Feng, director of the Brookings-Tsinghua Center for Public Policy, describes the collection and use of SMFs as a hotbed of rent-seeking and corruption, and a convenient source of income for corrupt officials. Wang has called for an immediate end to SMF, citing its shaky legal ground and rampant abuse.

Wang Ming, professor at Tsinghua University and CPPCC member, blames SMF irregularities for aggravating a wide range of social ills: SMF collection intensifies social inequality and injustice as it hits underprivileged families especially hard, which may choose to abandon their “extra” kids; the collection also infringes on the rights and interests of women and children as it may increase abortions, baby-abandoning, and the selling of one’s own child.

Wang also argues that multiple standards in SMF collection leave much room for discretion and maneuvering, which can easily breed corruption and fuel opposition between government officials and the masses. Lastly, the collection of SMFs further drives down the already low fertility desires in China, which is bound to result in an ultra-low birth rate in the long term, aggravating the labor shortage faced by a rapidly aging society.

The NAO audit found that from 2009 to 2011, birth rates in the 45 counties being examined stood at below 1.4 percent, which constitutes a low level by international standards.

Wang Feng and other experts stress the urgent need to end the one-child policy. SMF will fade into history once China allows all citizens to have a second child, said Wang.