Shanghai Rocked by Pension Funds Scandal

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Two senior government officials in Shanghai have been fired for their involvement in mismanaging hundreds of millions of dollars from the city's pension fund. It's being called the worst corruption scandal in decades. A hundred investigators have been sent to Shanghai to investigate the extent of the wrongdoing.


We turn now a specific case in Shanghai. The city is being rocked by what's being called its worst corruption scandal in decades. Two senior government officials so far have been fired for their involvement in mismanaging hundreds of millions of dollars from the city's pension fund.

Now 100 investigators have been sent down to Shanghai to investigate the extent of the wrongdoing.

NPR's Louisa Lim joins us now from Shanghai. Hello.

LOUISA LIM reporting:

Good morning, Renee.

MONTAGNE: Give us some background on this case.

LIM: Well, this scandal stems from the misuse of the city's pension funds. And according to the mainland media, the man in charge of the fund, Zhu Junyi, illegally invested $400 million - that's about a third of the pension fund. And he apparently lent the money to an investment company. They used it to buy the rights to operate a road.

Now that investment company is now in financial trouble. But also, interestingly, Chinese media reports say that this misuse of public funds goes back a long way. That even in the 1990s pension fund money was being invested in failed real estate projects and that this man was not acting alone but on instruction from city officials and their relatives.

And now we are beginning to see some scalps roll over this scandal. Zhu Junyi has been, in fact, the highest Shanghai official to be removed for corruption since the 1980s. And we're also seeing a close aid of Shanghai's party boss, a man called Qin Yu, who, in the last few days, was also removed from his post because of financial mismanagement.

So it does seem as if responsibility for this scandal is traveling ever higher up the chain of leadership.

MONTAGNE: And as Anthony just pointed out, it's often the case that anti-corruption campaigns in China are politically motivated. Is there a political dimension to this particular case in Shanghai?

LIM: Well, there certainly does seem to be. I mean for the last two decades there's been a very influential group of top leaders who have links to Shanghai. They're known as the Shanghai Faction and led by the former President Jiang Zemin.

Now interestingly, the current president, Hu Jintao, is not a member of that faction. And analysts are looking at this anti-corruption campaign as his first serious attempt to, as they put it, put the knife into the Shanghai Faction and break down its power. And this also comes ahead of some major personnel changes next year.

So it looks like President Hu is trying to consolidate his power ahead of that reshuffle. But on the other hand, although there could be a political dimension, there are also huge amounts of money involved. And problems with the pension fund do have the potential to lead to large amounts of public dissatisfaction. So there are other good reasons for Beijing to get involved and to send a message perhaps to other local governments that Beijing will step in if the become too corrupt.

MONTAGNE: Now just very briefly, earlier this week the government stepped up its fight against corruption. It asked officials to report details about their personal lives. What does this mean?

LIM: Well, it means that they must report all sorts of things to the party. Things like whether they're building, buying or selling property. Whether members of their families are traveling and emigrating overseas. But this in fact is a resuscitation of old rules that have been in place for nine years but clearly have not been swallowed very closely by officials. So it does seem as if by trying one more to enforce these rules, the government is in a way admitting that it's failed in the past.

MONTAGNE: Thanks very much for joining us. NPR's Shanghai correspondent Louisa Lim.

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