March 19, 2012 / 6:18 AM / in 6 years

China audit details fraud, waste at Beijing-Shanghai railway

BEIJING (Reuters) - China’s National Audit Office said on Monday it had uncovered more evidence of fraud, waste, mismanagement and irregular accounting and procurement, totaling billions of yuan, at the flagship high-speed Beijing-Shanghai railway.

The 217 billion yuan ($34 billion) railway, hailed as a miracle project by officials when it opened in June 2011, has been beset by a litany of management failures and unusual practices resulting in tens of billions of yuan of waste.

The second audit report into the rail link, published on the government website (, said irregularities started from the bidding process of the project as early as December 2007, five months before construction officially broke ground.

The report by the Chinese cabinet’s watchdog found the Ministry of Railways shortened some periods of preliminary review for bidders to 13 hours from the standard five days.

While the ministry’s corporate arm bought at least 849 million yuan worth of materials from non-bidding suppliers at higher prices than those quoted by winning bidders.

“The Ministry of Railways has noted that they will strictly follow rules in future bidding for construction and material purchase,” the audit report said.

China’s Beijing-Shanghai high-speed railway line started operation in June 2011 after 42 months of frenzied development, marking the zenith of China’s railway construction boom.

The new report said 413 million yuan spent on train windshields was wasted when design specifications were changed in March 2011, three months before the line opened.

The report said it had also found evidence of wrongdoing by local governments.

It said Jiangning economic development zone in Nanjing applied for land compensation worth 140 million yuan from the railway using false documents, receiving 40 million yuan of payments by end of June 2011.

It found that Beichen district government in Tianjin had 340 million yuan in its own accounts instead of being paid promptly in compensation for land procured for the railway.

“After the audit office found the problems, local authorities are highly concerned and are rolling out relevant investigations,” the audit report said.

The 1,318 km (800 miles) Beijing-Shanghai high speed railway has also struggled to pay suppliers and contractors.

By the end of May 2011, the railway had 8.251 billion yuan worth of debts owning to 656 suppliers and 1,471 contractors, the National Audit Office said.

Liu Zhijun, the former railway minister, was removed from his post as Communist Party chief at the ministry in early 2011 for “serious disciplinary violations”.

In March 2011, the National Audit Office said that almost $30 million of funds was misappropriated through 2010 by individuals and work units at construction companies during the building of the line.

($1 = 6.3227 Chinese yuan)

Reporting by Zhou Xin and Nick Edwards; Editing by Michael Perry

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