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491m yuan embezzled from BJ-SH high-speed rail

(Xinhua)

08:17, March 20, 2012

BEIJING, March 19 (Xinhua) -- China's auditing authorities said on Monday that 491 million yuan (77.84 million U.S. dollars) has been embezzled from the Beijing-Shanghai high-speed railway project.

"Some local units along the railway link extracted, intercepted or misappropriated 491 million yuan that was intended to act as demolition and relocation funds," the National Audit Office (NAO) said in a report based on an audit conducted between June and September 2011.

The report listed several irregular practices in the construction and management of the project.

Purchases that were not made through standard bidding involved 849 million yuan, while the cancellation of wind barrier construction projects in some sections meant that 413 million yuan in purchasing funds was not properly used, according to the report.

As of the end of May last year, companies involved in the construction of the Beijing-Shanghai high-speed railway held 8.25 billion yuan in arrears, 5.87 billion to material suppliers and 2.37 billion to construction laborers, the report said.

After three years of construction, the 1,318-km railway linking Beijing and Shanghai went into operation in June last year, shortening the traveling time between the two economic zones to around five hours.

China plans to spend a total of 217.6 billion yuan on the project; investments made as of June last year totaled 196.27 yuan, the NAO said.

The final cost is not yet known, as several spending changes have yet to be confirmed, the report said.

China's railways have seen fast expansion over the past decade. However, the sector has faced increasing financial difficulties after a deadly train collision last July that killed 40 people, eroded investor confidence and limited the ministry's ability to borrow money or sell bonds.

The lack of funds has triggered suspensions for some projects, and reports have indicated that the Ministry of Railways is considering creating new channels for funding.

China plans to spend 400 billion yuan on railway infrastructure construction in 2012, slightly down from 469 billion yuan in 2011 and a marked decrease from over 700 billion yuan in 2010, according to the ministry.

In a meeting last month, Premier Wen Jiabao said investment in railway construction will mainly be covered by state capital and funds raised through treasury-guaranteed bond issuance, while private capital will be introduced "in an orderly way after careful planning."

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