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12 July 2013
Audit office finds problems
with foreign-loan projects
The National Audit Office has revealed that
5.02 billion yuan has been improperly used
in projects financed by foreign aid and loans.
The auditing agency posted the findings of its
annual report on foreign loans and aid proj-
ects in 2011 on its website last month, after
surveying 94 projects. Violations of laws, reg-
ulations and loan or assistance agreements
were among the illegal acts committed. Also
discovered were inadequate internal controls
and irregularities in financial management.
Big four state banks report
May reduction in new loans
China’s big four state banks lent 208 billion
yuan in new local-currency loans in May,
down from 245.5 billion yuan in April,
suggesting China’s economic growth was
weakening. Citing a banking source, the 21st
Century Business Herald, a Chinese newspaper,
reported that about half of the loans so far this
year were priced above the benchmark rates set
by the central bank, while 15 percent were priced
CICPA sends inspectors
to conduct on-site probes
The Chinese Institute of CPAs sent investi-
gators to conduct on-site reviews of eight
large accounting firms last month. The
Global Times reported that the inspec-
tions were part of an effort to prevent
fraud in capital markets. The eight firms
include Ernst & Young Hua Ming, Jonten CPAs
and Zhonghua CPAs.
Offshore yuan settlement
might go beyond London
Hong Kong may extend collaboration on
its offshore yuan business to financial cen-
tres other than London, it was reported last
month. The Hong Kong Monetary Authority is
considering adding New York and Singapore
to the list of cities where settlement of over-
seas yuan contracts can take place, Xinhua
quoted Norman Chan, the HKMA chief execu-
tive, as saying.
The total debts of local governments in China rose 13 percent to 3.85 trillion yuan
at 31 December 2012 from two years earlier, the National Audit Office, China’s
state auditing agency, revealed in a report issued last month.
The auditor highlighted that debt levels rose by more than 20 percent in some
of the areas sur veyed, adding that “effective measures to strengthen debt man-
agement” were required.
The report noted numerous problems, including illegally arranged debts,
improper use of funds and falling revenues that could impact the ability to repay,
The 36 localities audited included the cities of Tianjin, Shanghai and Guangzhou,
as well as provincial governments and local municipalities across the Mainland.
There are increasing concerns regarding the debts incurred because many lo-
cal governments have borrowed from companies in private arrangements at high
cost, with the money often used to fund risky real estate projects.
State auditor warns over rising
levels of local government debt
Industry lobby, senator say PCAOB pact is first step
The United States government is facing pressure from large corporations and
an influential senator to address the oversight of Chinese corporate audits as
disputes persist, despite the two countries reaching a deal on the issue in May.
The U.S. Public Company Accounting Oversight Board announced an agree-
ment on 24 May that would allow U.S. regulators to obtain audit documents for
enforcement cases, but would not allow inspections in China as the board had
However, last month the U.S. Chamber of Commerce, A merica’s largest busi-
ness lobby group, called on Washington to push China into broadening coopera-
tion on audits. Chamber vice-president Tom Quaadman described the May pact
as only a partial success.
Meanwhile, Senator Charles Schumer urged Washington to encourage
China to cooperate more on accounting-fraud investigations involving Chinese
companies trading on U.S. exchanges.
In a letter sent to treasury secretary Jacob Lew last month, Schumer said the
U.S. administration should engage China in “discussion of ways to protect U.S.
investors and help boost investor confidence in Chinese companies seeking to
raise capital in our markets.”
Schumer, a Democratic Party member from New York who is chairman of
the Senate’s powerful rules committee, described the May agreement as “a
good first step” but not good enough to effectively enhance investor confidence
in Chinese companies.
China should grant U.S. regulators access to audit information of China-
based companies suspected of fraud, Schumer told The Wall Street Journal.
U.S. government pressed to deal
with China over audit
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