Auditor General Li Jinhua revealed the misuse of funds in his annual state audit report to the legislature in Beijing. The report detailed spending on 34 highway projects last year.

The expressways run a total length of 5,324 kilometers and 166.2 billion yuan was invested in the infrastructure.

The 1.64 billion yuan represented one third of accounts payable. Li's report said local governments or land requisition departments misused the money. The funds were spent on things ranging from bonuses for officials and other construction projects.

Li cited a highway project near Wuhan, capital of Hubei Province. It required 687 hectares of land with a standard compensation fee of 2.335 million yuan per hectare. However, farmers received only 72,000 yuan per hectare.

Li said, supervision and construction departments on 26 projects had appropriated 2.16 billion yuan for entertaining, conferences, bonuses, external investments or other construction.

Auditors also spot checked 20 highways in use for more than a year and discovered that 14 failed to meet the average transport capacity cited in feasibility reports before construction.

Li attributed the failure to "local governments that purposely overvalued projects in order to get them approved."

"Some departments in charge have multiple roles such as decision-maker, supervisor and builder," the auditor general said. "This leads to illegal operations, corruption and conflicts of interest."

Li said despite problems such as construction management, land requisition and investment effectiveness, the general situation had improved considerably in the last five years.