China’s beefed up statistics and accounting laws under review, robust fines to increase cost of fraud
China’s revisions to laws governing statistics and accounting to mete out heavier penalties for falsifying data and financial reports include fines of up to 10 times any illegal income for businesses and other entities.
The revisions came amid Beijing’s increased focus on data accuracy and authenticity to inform decision making, while aiming to cleanse markets of fraud.
China’s top legislature, the Standing Committee of the National People’s Congress (NPC), on Tuesday began the review of the proposed amendments, with revisions and new clauses drafted to increase fines and the cost of violations, state media reported.
“In recent years, statistical work has faced challenges, like persistent data fabrication, ineffective supervision and low non-compliance cost for offenders,” said National Bureau of Statistics (NBS) director Kang Yi.
China should be more transparent about economic data, government adviser says
China should be more transparent about economic data, government adviser says
The 14 amendments to the law governing statistics would ensure local authorities, statistical agencies and department heads must not request, imply or guide their staff, subordinates or those subject to statistical investigations to submit false data.
The amendments also stipulate that offenders would be punished, including being publicly named and discredited.
The revised statistics law would also increase fines up to 500,000 yuan (US$69,000) for businesses and other entities that refuse to provide or delay data submissions, according to the People’s Daily newspaper.
Beijing has been eager to clamp down on local officials inflating or manipulating key economic statistics, including gross domestic product and debt.
Reliable data from genuine businesses is essential to gauge the state of the world’s second-largest economy, as well as to design policies and quell long-standing external concerns about the reliability of China’s performance metrics.
Last year, the NBS inspected several central and western provinces, including Guizhou, with the bureau warning that statistical crime was still rife.
In October, the NPC Standing Committee also sounded the alarm over asset quality data at small and medium-sized financial institutions, saying that the numbers did not “reflect the actual situation”.
China’s Accounting Law is also set to be updated, with Beijing vowing to crack down on financial crimes, including falsifying accounts.
Accounting information is usually distorted and financial fraud and a lack of internal audits among listed companies is still rampant
The changes are aimed at protecting market order and upholding rules in the world’s second-largest financial market.
“Accounting supervision is weak when misconduct is difficult to pursue and offenders are let go lightly,” Liao Min, China’s finance vice-minister, said in a statement to the legislature.
“Accounting information is usually distorted and financial fraud and a lack of internal audits among listed companies is still rampant.”
The 17 amendments to the Accounting Law are also set to impose heavier fines, including a maximum penalty of 2 million yuan for falsifying financial reports, while offenders with illegal incomes of more than 200,000 yuan may be fined up to 10 times the amount of the illegal gains.
China claims ‘biggest corruption in statistical sphere’ amid fake data crackdown
China claims ‘biggest corruption in statistical sphere’ amid fake data crackdown
Aligning with the provisions of China’s Securities Law, the revised accounting provisions would raise fines for a range of offences, including when businesses fail to set up account books as mandated by law and those who operate unofficial account books.
To strengthen deterrence, fines for businesses faking records and financial reports, as well as instigators of accounting crimes, would also be higher, although the specific sizes have not been disclosed.
In the aftermath of market routs, Chinese watchdogs have stepped up reforms and law enforcement to improve the quality of listed firms to restore confidence and revive battered stocks.
