Governments of two cities in central China's Henan Province are investigating claims that their Beijing liaison offices spent almost US$100,000 to buy huge amounts of a luxury liquor that turned out to be fake, officials representing both cities told Xinhua on Friday.

Heads of the two offices have also been reprimanded by the municipal governments of Luohe and Xuchang, the officials said.

According to media reports, the two offices spent more than 660,000 yuan (about US$96,600) on 777 bottles of Kweichow Moutai, the top liquor in China, in early February.

The case came to light after guests of the offices drank the spirits, which are produced in southwest China's Guizhou Province, and found they were fake. At that point, the buyers complained to the Beijing Municipal Industrial and Commercial Bureau, which called in the police.

The investigation led to the arrest of three suspects, whose status at present isn't known.

The offices paid an average of 849 yuan per bottle, which is equivalent to almost 18 percent of the national average income for farmers.

When the purchase of the fake liquor hit the headlines, many members of the public began to complain about the use of public funds. Others asked why liaison offices were buying the liquor in Beijing rather than where it was made.

Many also wondered why there were still so many liaison offices in Beijing.

Local governments began to set up liaison offices in Beijing in 1949. The offices boomed in the 1980s as China began to move from a planned to a market economy. Such offices acted as representatives of local governments when the inter-city transport system was far less developed than at present.

The exact number of such offices is hard to calculate, but the Legal Daily newspaper has estimated there are more than 10,000 such offices in Beijing, including those of governments of various levels, associations, companies, universities and other bodies.

Local governments also set up offices in other cities. Weifang, a city in eastern Shandong Province, closed its 11 liaison offices in main cities including one in Beijing at the end of March to reduce spending.

Local authorities like liaison offices in Beijing because they want more resources from ministries that are based in the capital city, the newspaper quoted Li Xin of the Capital Normal University as saying.

A comment published this week by the People's Daily, the mouthpiece of the Communist Party of China, questioned whether the buyers could get their money back, and if not, who should shoulder the loss?

The paper said the case was an example of the lack of transparency and supervision in government expenditures.

The heads of the liaison offices claimed that they had bought the liquor on behalf of a hotel and a paper-making company in Henan.

"The thing was not as reported," said the head of Luohe's liaison office, surnamed Dong.

Netizens weren't buying it, saying that the liaison office was meant to be an agent of the local government, not a liquor buyer for companies.

It's not known how much the offices spend in total. The expenditures would be huge if each spent 1 million yuan annually, the Beijing News said.

(Xinhua News Agency April 17, 2009)