China flags top state financial firms for tax evasion, improper loans

[BEIJING] China’s top auditor flagged several of the nation’s largest state-backed financial institutions for tax evasion and improper lending as Beijing seeks to rein in financial risks.

According to the National Audit Office’s annual report released on Tuesday (Jun 23), Bank of China allegedly exploited tax preferences meant for public funds to avoid 2.37 billion yuan (S$452 million) in taxes. While the auditor uncovers tax-related irregularities annually, this marks the first time a major state-owned lender has been explicitly called out for tax evasion in recent years.

Between April 2023 and August 2025, the lender used two affiliated financial institutions as conduits and enlisted a large number of employees as nominal investors, each contributing between one yuan and 100 yuan, to disguise 11 private funds as public ones. The manoeuvre allowed the funds to qualify for corporate income tax exemptions, the report said.

Bank of China was one of three major financial institutions scrutinised by the auditor as Beijing intensifies its focus on systemic financial risks. Top leadership has prioritised financial stability as policymakers navigate trade frictions and a technology rivalry with Washington to revive a flagging domestic economy.

The report also singled out Agricultural Bank of China for failing to adequately vet loan applications. The lender extended 11.07 billion yuan in loans to projects that failed to qualify as high-standard farmland developments between December 2021 and August 2025, with some of the capital later diverted into wealth-management products and debt repayment.

Bank of China and Agricultural Bank did not immediately reply to requests for comment.

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Bank of China pledged to implement the auditor’s rectification requirements and beef up its risk and compliance management, according to local media reports.

Financial conglomerate China Everbright Group was also cited for governance failures. As of August 2025, the group lacked effective decision-making control over several majority-owned subsidiaries and exercised inadequate oversight of certain directly managed units, while some subsidiaries improperly utilised the Everbright brand, the watchdog said. BLOOMBERG