Audit shows China's government mismanaged $6.7 billion

BEIJING (Reuters) - Chinese central government departments misused or mismanaged more than 46 billion yuan ($6.73 billion) last year, including using disaster relief money to build government offices and diverting funds to speculate in stocks, the National Audit Office said on Thursday.

An audit of 53 central government departments and their subsidiary units found the misuse or embezzlement of 4.52 billion yuan in 2007, down from 7 billion yuan the year before, the audit office said in a statement on its website.

In government spending, the auditor found "managerial irregularities" in the use of another 41.7 billion yuan, including illegal loans and the misappropriation of billions of yuan from public housing funds.

It said 192 people had been prosecuted or handed administrative punishments and another 14 detained.

Offences were committed across a raft of departments, including the education and commerce ministries, the National Bureau of Statistics and the State Administration of Taxation.

China has warned corruption is so endemic as to threaten the ruling Communist Party's grip on power, but Beijing permits little independent oversight of government spending.

In June, the country's auditing watchdog found that 11 city governments had kept more than 186 billion yuan, or more than 70 percent of revenues generated from land sales, off their books to spend freely without supervision.

China Development Bank, a state lender with a roughly 3 percent stake in Barclays, was found to have illegally granted 9.1 billion yuan in loans. The audit office said the bank was also liable for 24.57 billion yuan in misused loans, of which 5.8 billion yuan had been invested in stocks and property.

The auditor said the Agricultural Bank of China, the last of China's "big four" banks awaiting a government bailout, had 24.3 billion yuan in irregular operations.

It added that China Everbright Bank, the People's Insurance Co (Group) of China and the China Reinsurance Group Corp had misused 16.79 billion yuan.

The audit also found that China's four state-owned asset management firms -- Huarong, Cinda, Great Wall and Orient -- could face difficulties because they had not earned enough from selling non-performing assets to pay the interest on their debt.

(Reporting by Ian Ransom and Zhou Xin; Editing by Ken Wills)

($1 = 6.837 yuan)