It is questionable whether the Ministry of Finance has the power to give huge rebates to State-run enterprises, according to a signed article in Yanzhao Metropolis Daily. An excerpt follows:

China Petroleum & Chemical Corporation (Sinopec) disclosed on December 26 that it would get a State subsidy of 5 billion yuan ($639 million) to cover its losses from low domestic refined oil prices. The compensation to Sinopec's refinery business was 10 billion yuan ($1.28 billion) in 2005. In the country's audit report delivered last June, General Auditor Li Jinhua pointed out that the Ministry of Finance's rebate of 10 billion yuan to make up Sinopec's losses violated the principle of separating revenue and expenditure.

The Ministry of Finance repeated its mistake after the audit office reported it. It turns the audit storm into just a puff of wind as it loses authority.

But why would the Ministry of Finance rather violate the principle than allocate the money through the regular expenditure process? It is because regular budgetary expenditures should be approved by the National People's Congress while it is easier to give a direct rebate. But who has given the ministry the power of rebate? Is it legal to spend billions of public money without going through any procedures?

State-run oil companies like Sinopec are quite profitable. Their employees enjoy outstanding wage and remuneration levels. And the profit of Sinopec's major business reached 93.967 billion yuan ($11.89 billion) in the first three quarters of last year. Sinopec only has some losses in the refined oil business, which is quite small compared with its major business profits. An internal adjustment would dissolve the problem.

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