Page last updated at 04:35 GMT, Friday, 12 June 2009 05:35 UK

China warning on 'little coffers'

China's 'little coffers' siphon state cash for private use

China is making a new attempt to stamp out illicit accounts known as "little coffers" - money which officials have skimmed from public funds.

Communist Party and government officials have been warned that they will be severely punished if they do not give up the cash.

A party document described the small coffers as a "cancer" which must be eliminated.

The ruling communist party regularly announces anti-corruption campaigns.

These have netted some high profile individuals but analysts have long noted that a lack of a free press and rule of law in a one-party state suggests corruption is likely to remain endemic.

Diversion of funds

State-run newspapers reported that the "little coffers" were a longstanding source of corruption and economic abuses.

A document titled "Directions on Deepening the Crackdown of Small Exchequers" warned that attempts to hide illicit accounts or spend their funds "in a blitz" will lead to "harsh punishment".

"The illegal phenomenon has resulted in inaccuracy in accounting, disturbance in market order, losses in state income and property and corruption," it said.

Central and local departments now have more access to more cash than ever before, and diversion of these funds is a serious problem.

State media added that audit reports have often found money that has been spent on apartments, cars and trips abroad for staff, and sometimes disappeared in outright embezzlement.

Xu Zongheng
Mr Xu has alleged links to Wong Kwong-yu

Meanwhile, the mayor of China's southern boom town of Shenzhen, Xu Zongheng, has been sacked for "disciplinary offences", state media have said.

Several officials have already been caught up in a probe into Wong Kwong-yu, the founder of China's biggest electronics retailer, Gome Appliances.

Two senior police officials responsible for investigating financial crimes have also been caught up in the spreading scandal.

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