Slush funds target of huge crackdown

By Hu Yinan (China Daily)
Updated: 2009-04-29 09:08

The Ministry of Finance has launched a massive seven-month crackdown aimed at drying up slush funds that illegally use billions of yuan each year of government money.

The slush funds, which are known as "small treasuries", are understood to be widespread within the State sector.

The practice was described as "the root of collective corruption" by Liu Xirong, vice-chairman of the National People's Congress Law Committee, who called for it to be listed as a crime under China's criminal law.

The crackdown will encompass all party organs and public institutions - especially those that are state-funded.

Informants who help investigators may be eligible to receive up to 100,000 yuan ($14,645), according to a notice released by the ministry on its website (www.mof.gov.cn) yesterday.

The slush funds are essentially secret accounts set up by Party organs and public institutions to collect extra revenue from collective moonlighting activities. The accounts are used to pay additional funds to managers and workers.

"After the economic reform, workers and staff became increasingly dependent upon extra income distributed openly or secretly by their work units," said a recent joint study by researchers Xie Yu and Wu Xiaogang.

These earnings "accounted for about one-third to 40 percent of workers' total income in the 1980s, and overtook normal salaries in the mid-1990s," said the scholars.

Auditors found 13 billion yuan ($1.9 billion) of illegal "small treasuries" in the first half of 2006, according to earlier reports. An additional 140.6 billion yuan ($20.6 billion) was identified between 1998 and 2006.

The National Audit Office believes central government departments misused or mismanaged more than 46 billion yuan ($6.73 billion) in 2007.

The Communist Party of China's (CPC) discipline watchdog last week said some 881,000 Party officials involved in 852,000 cases were punished for misconduct in the past five years.

President Hu Jintao in January urged the anti-corruption body to "firmly correct official wrongdoing". The crackdown is a joint effort of the CPC Central Committee for Discipline Inspection, the Ministry of Supervision, the Ministry of Finance and the National Audit Office and is headed by Finance Minister Xie Xuren.