2014-08-24

How Much Corruption in Land Sales? China Set to Crack Open ¥15 Trillion Can of Worms

China is conducting a strict of ¥15 trillion worth of land sales as part of the anti-corruption sweep.

China launches large land-sale audit to fight corruption
Led by the State Council, the move will involve audits of land income, land requisitions, reserves and supplies between 2008 and 2013, changes in farmland volume between 2009 and 2013, the protection of cultivated land, and sea use planning.

The audit report is expected to be released in October.

Land sales have become a vital source of income for local governments. In 2013, land revenue totaled 3.91 trillion yuan ($640 billion), according to the Ministry of Finance. The figure was 2.67 trillion yuan in 2012.

The Chinese articles are focusing on the potential corruption by officials, who are probably not sleeping these days. Some good snips from the Google Translation below:
he said such as land transfer states have reached a certain amount in some places the book, in fact, but most of these inside secretly transferred land revenue losses of state-owned enterprises, state-owned enterprises after years of surplus revenue to finance partially paid, Other balances to switch to channel spending.

......"Auction fraud is also very easy, the government had negotiated with companies in advance, and then find a few to accompany the subject of the auction posturing, of which there is money deals."
Some local governments have been paper over losses at state-owned companies with misdirected land sale revenue. No doubt those SOEs borrowed money based on their solid financial status. The SOEs paid back the money if they had some left over or earned a profit at year end. The latter is the type of corruption that will take down officials all over China. This audit is going to open up a major can of worms.

审计署严审15万亿土地出让金 部分官员或失眠
Many senior officials sacked and real estate are inseparable, land areas hardest hit by corruption.

From mid-August, the National Audit Office launched the first national land finance large audit and hit land transfer payments, the area of ​​land acquisition, storage, supply, and up to 15 trillion yuan of land transfer will be strictly examine objects. Among them, the abuse of power and corruption in the land areas will also be disclosed in the audit report in two months.

"Now in other systems, the audit working group to 'under the table of accounts' have turned out, the estimated land audit will not easily put in the past." Close to the land department officials Li (pseudonym) to the "China Times" reporter, said Financial audit only check the "bottom accounts" to the real thing, if you can find out the true ins and outs of the audit, and then tracing them seriously, many local officials would be affected.

Earlier, in the central inspection teams visited the 21 provinces, 20 provinces found that the existence of the phenomenon of corruption in real estate, accounting for up to 95%, while the 19 provincial and ministerial level officials sacked after the central inspection teams stationed, including many senior officials sacked and Real Estate Industry inseparable, land areas hardest hit by corruption.

Inventory "under the table of accounts"?

"Auditing land transfer, many officials estimate a night to sleep." One person southern city in land systems Zhang Hua (pseudonym) told reporters bluntly, real estate has been a government official involved in most areas, especially land and planning department, hands directly in charge of the land and planning powers.

According to Li revealed that the central audit had been gradually working group of financial institutions, regulatory units "fishing expedition" type review. Regular review of the past is different, this higher level of business audit staff, more detailed grasp.

"The Working Group has maintained for many digital sensitivity, often require the unit to come up with a more detailed trial data, unlike the previous regular audits as 'walk form'." Li sighed, some organizations being audited group a check and then check , repeatedly being asked to come up with detailed data. Many organizations in part by the audit "under the table of accounts" gradually inventory.

Li also told reporters that in the previous audit work, finance, taxation and land resources, such as system audits often blind, in the regular review, "It's hard to ferret out a big problem."

In the past, the newspaper investigation found that hundreds of billions of land transfer has become a close watch on the local government's "fat", the local government is not only financially dependent on land transfer income the higher the degree of this income use it often "secretive."

Publicly available data show that in 2013, the local government land transfer revenue hit a record high, reaching 4.1 trillion yuan, an increase of about 45%.

"It's part of the revenue point of view it is difficult to use in public accounts, books submitted to higher authorities also hard to find." A prefecture-level city in Guangdong, a person audit system Chao (a pseudonym) noted that such accounts are usually audited department called "under the table in the account."

"No earmarking land transfer phenomenon is most rampant, the conventional definitely check out the book." Yangtze River Delta, a prefecture-level city, an official told the GAO review found that reflect conventional land transfer payments problems, he said such as land transfer states have reached a certain amount in some places the book, in fact, but most of these inside secretly transferred land revenue losses of state-owned enterprises, state-owned enterprises after years of surplus revenue to finance partially paid, Other balances to switch to channel spending.

He believes that the land transfer audit from earmarking node, you can follow it identified a number of problems.

Previously, the newspaper in the investigation of Guangzhou Marshal House "king" Vanke block was recovered found that the land was withdrawn after the government, the Guangzhou municipal government has publicly promised to withdraw the land will pay 700 million yuan "ransom "But after three years, this commitment has not yet materialized. And about the project and the funds spent on reconstruction planning official documents, was not clear that the information about the refund. In this regard, the outside world have questioned the land transfer "has not come out."

"This land where the Golden Flower in the relevant departments of the heart are a few, but came back again to raise the estimated not so easy." The Guangzhou Municipal Bureau of Finance at the time, an insider told reporters interviewed.

Previously, the Audit Commission respectively in 2007, 2009, 2011 parts of the land fund to do audit work. Local government violations, disguised relief land transfer, land units outstanding land transfer, land transfer part of the fund are not included in budget management and other issues often occur. However, a comprehensive review and rectification, pursue efforts are trapped in a "thunder, little rain," the embarrassment.

It is worth noting that this year's government work report, first proposed land transfer payments for farmland protection and to conduct a comprehensive audit, the Audit Commission audit of land and resources will also be included in the focus of the work.

According to media reports, the specific audit local (Audit) Tepai Ban led by the provinces (autonomous regions), a member of the audit team and the rest of the staff by Tepai Ban audit departments to deploy the composition of municipal government is the direct object of the audit, the audit mode for off-site Cross audit, working hours or as of the end of October.

These respondents government systems analysts, this audit is expected to far exceed the intensity of the storm the previous regular review.

In this regard, the local government began to prepare early, some not included in the pilot provinces, the first two months of work has been carried out self-correction. For example, the Guangdong provincial government issued a notice requiring all units to do nine self-correction work and ensure the completion of the rectification in July 15.

Huge space for rent

Land transfer review storm, not only touched the interests of local governments on the use of part of the land transfer, but also to prove safety officials in the land trade links hidden deep corruption.

This year, after the central inspection teams visited more than due to the real estate sector officials sacked violation of discipline problems in the land transfer process, there is a larger space secret operations, the widespread abuse of power.

Zhang Hua pointed out that many cities are old land reform program, just symbolically shall pay the small amount of land, developers get the project, often proposed to increase the floor area ratio, or changes require architectural planning, because the old higher development costs change, the government does have a reason to change, outside of the middle bartering involved would know.

"Shenzhen land scarcity, the current land use trends in the government is to improve the volumetric rate, an expansion of the use of space efficiency, so now change the volume rate is relatively common." Shenzhen appoint a District Planning and Land Authority, a source said.

However, involving planning and the volume rate of change announcement, the issue was never mentioned payment of a premium, how much volume rate increase to pay the premium to the outside world have no way of knowing.

"Auction fraud is also very easy, the government had negotiated with companies in advance, and then find a few to accompany the subject of the auction posturing, of which there is money deals." Housing prices in Hunan, a person in charge of a city, told reporters said previously careen many plots have been repeatedly downtown looks weaker developers, these developers actually have a government background.

In addition, the person in charge of housing prices above told reporters the government in order to raise the value of regional plots, will be traded on the surface of high land prices, by secret operations, will then sell land to developers agreed in advance, and then return the money part of the land .

The middle of a capital city of a marketing person in charge of housing prices in a housing enterprises previously was responsible for land development work, familiar with the land sale process.

"Each district has a land bank of responsible government UDIC, if you go to a good location Land City Investment Company, the mayor needs to sell finalized while the district is responsible to negotiate the land, or at least need to get through two personal relationship, That Mayor and Deputy Secretary in charge of land use planning. "Housing prices in the marketing of the person in charge, told reporters that the bureau is only the executive branch, in fact, the main decision-making authority is the competent leadership of the city's. His city, good land per year are finalized by the mayor himself.

The person in charge of marketing, said housing prices, especially when the land market hot, a lot of projects to sell all secret operations. "Quality land grab many people, we need six months to a year in advance to communicate with City investment company, will certainly require RBI relationships. Sold some land project early relationship between the families of government officials, the store changed hands again for some time."

"Certainly not a panacea to get dozens, at least a million, before cash and property to the majority, nearly two stare borne anti-corruption officials dare not accept cash, usually in other forms, such as sub-shares, after completing construction projects profit-sharing, brokered by the middle of acquaintances guarantee the payments and some other officials after retirement. "the person in charge of marketing, said housing prices.

In addition, the housing prices marketing official also revealed that in many "irregularities", the most difficult to change the nature of the land, you need a tough background, a commercial real estate leader, once a city of Hunan residential land will be changed to the success of commercial land, building the price of office and commercial properties than residential undoubtedly high.

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