Loans to continue despite aid graft

PUBLISHED : Saturday, 29 November, 1997, 12:00am
UPDATED : Saturday, 29 November, 1997, 12:00am

The World Bank will continue to lend the mainland between US$2.5 billion (HK$19.32 billion) and US$3 billion a year to support economic reforms.

The aid would continue despite revelations of funds being misappropriated by corrupt cadres, Xinhua quoted the bank's head in China as saying yesterday.

Yukon Huang, director of the World Bank's China programme, said: 'The bank supports China's goal of increasing investment in central and western regions, which have largely lost out to coastal regions for funding.' Financial problems facing many local authorities made it difficult for them to raise bank loans, he added.

He said China must continue reforming its state sector to ensure healthy, long-term growth of the economy.

'China should improve its fiscal and pension systems, reform its state-owned enterprises and commercialise its state-owned banks,' he added.

State auditors have vowed to closely monitor overseas loans - including those from the World Bank, the Asian Development Bank and other international institutions - after finding that some had been misused.

Senior officials from Shandong, one of the first provinces to use World Bank loans for reforms, said yesterday they had strengthened supervision to ensure the aid was put to its best use.

'We have set up a multi-level auditing programme to avoid exaggeration of project costs, false expense claims and padded payroll accounts by cadres,' officials said.

More than 33 development projects in Shandong, including agriculture, education, transport, power and health, have been aided by World Bank loans since 1980.

State Auditor Huang Shiqiang had admitted that corrupt cadres, especially officials responsible for agricultural projects, had misappropriated multi-million dollar World Bank loans for projects in Jiangxi, Hunan, Zhejiang, Fujian and Guangxi.

China is the World Bank's largest single borrower, with more than US$28 billion in credit approved since it joined the bank in 1980.