BEIJING, June 4 (Xinhua) -- More than 70 percent of net proceeds from land sales in 11 Chinese cities, or 186.41 billion yuan (12.52 billion U.S. dollars), were not included, as stipulated, in the budgets of local governments, the country's audit authority said in a report released Wednesday.
The finding was among several violations discovered in an audit campaign launched by the National Audit Office (NAO) in 2007 to look into land sales in 11 cities from 2004 to 2006.
The 11 cities included Beijing, Shanghai, Tianjin, Chongqing, Harbin, Hefei, Jinan, Changsha, Guangzhou, Nanning and Chengdu.
China has stipulated that land users have to pay fees for their use of land to local governments, as the country's land was solely state-owned.
Such proceeds should be paid into a special account of local governments, and net proceeds, excluding fees such as service charges, would be submitted to the exchequer and become part of the budget of local governments to exclusively support infrastructure constructions and land development.
Land proceeds have been a major source of income for local governments. The NAO report showed net proceeds from land contributed about 26 percent of the budget to local governments of11 cities over the three years.
Total proceeds from land in these 11 cities were 351.04 billion yuan from 2004 to 2006, and net proceeds stood at 261.87 billion yuan, the report showed.
MESSY MANAGEMENT AND MISUSE
The NAO said 2.46 percent of the total land proceeds were not paid into the special accounts, while 71.18 percent of the net proceeds, the above-mentioned 186.41 billion yuan, were not put into local budgets.
Zhai Aicai, deputy head of the agriculture, resources, and environment audit department of the NAO, said land proceeds, if not included into the special account and local budgets, would be easily misused or embezzled.
The NAO found that about 8.37 billion yuan of land proceeds were misused. About 5.23 billion yuan was used to construct office buildings and other facilities for local governments, while about 3.14 billion yuan was used for loans and investment against rules, according to the report.
COLLECTION FAILURE OF LAND PROCEEDS
There were also cases of unpaid or uncollected land proceeds, although the majority, or 94.08 percent, of land proceeds had been duly collected, the report showed.
About 4.79 billion yuan of land proceeds in nine cities, including Tianjin, Changsha, Nanning, Chengdu, Harbin, Shanghai, Hefei, Guangzhou and Jinan, or 2.17 percent of the total 220.46 billion yuan, were illegally deducted or exempted.
More than half of the illegal deductions and exemptions were attributed to irrationally lower land prices, reimbursement of fees for land use, or charging fees for land use from local governments instead, the report said.
Experts had warned the improper deduction or exemption of land use charges would enable real estate developers to get a large area of land with relatively smaller amounts of money, which in effect lowered the cost for developers.
Ten cities, except Beijing, also saw a combined 17.33 billion yuan in late land proceeds payments; some cities had even granted the use of land before land users handed in the required fees, according to the report.
Zhai noted it would bring more risks to commercial banks, as real estate developers usually received loans from banks on the mortgage of the land use certificates, and later paid back bank loans and land use fees with proceeds from apartment sales.
LAND COMPENSATION FOR FARMERS
The national auditor also discovered that about 5.12 billion yuan of compensation to farmers whose land had been expropriated was either not paid in time or embezzled.
The compensation was either not collected from land users to pay into social security accounts of farmers, illegally loaned out, or entrusted to financial institutions for investment, the report said.
The report revealed that about 689.88 hectares of land were illegally sold for business purposes, and 1,541.05 hectares of land collectively owned by farmers were built into golf courses or villas on leases, which is against government rules.
Some golf courses were illegally built after the central government prohibited the construction of new golf courses in January 2004, it said.
"The leasing of land owned by farmers could not ensure the long-term interests of farmers," Zhai said.
As the leasing of land by farmers was not protected by Chinese laws, farmers would not be able to secure their rents once the business operations went into trouble or the enterprises went bankrupt, he said.
"On the other hand, the land would not become suitable for farming in the short term once it is used for other purposes than farming," he added.
USE OF LAND PROCEEDS
Despite the problems, land proceeds were mainly used for stipulated purposes, the report said.
Among the total net proceeds, 210.83 billion yuan went to infrastructure constructions, 5.69 billion yuan was used to develop land in the countryside, and 2.85 billion yuan was paid into social security accounts of farmers whose land had been expropriated, according to the report.
The combined sum, 219.37 billion yuan, was about 83.8 percent of total net proceeds collected in the same period, according to Xinhua calculation.
The NAO also said local governments had started to correct some problems revealed in the 2007 auditing.
By the end of January, these 11 cities had retrieved 6.83 billion yuan of land proceeds that had been embezzled, loaned out, reimbursed or not duly paid, along with 293 million yuan of embezzled or unpaid land compensations.
