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Sat, Nov 25, 2006 - Page 10 News List

China auditors find swindled millions

PENSION FUND PARTY According to Chinese law, social security funds have to be kept in state-owned commercial banks and managed under designated fiscal accounts


China's National Audit Office reported yesterday that its investigations uncovered 7.1 billion yuan (US$900 million) in pension funds misused in overseas investments, construction projects and unauthorized lending.

The report, seen on the National Audit Office's Web site, came amid reports authorities plan to tighten controls over the management of the country's 2.2 trillion yuan (US$280 billion) in social security funds, acting to prevent further abuses following a corruption scandal that toppled Shanghai's top leader two months ago.

Pension funds make up a key part of the country's social safety net, and top leaders have vowed to ensure the funds, until recently mainly under the control of local leaders, are used wisely.

The report said the audits found 4.8 billion yuan in misused funds after 1999 and 2.3 billion yuan in misused funds up to 1999.

Shanghai's Communist Party Secretary Chen Liangyu (陳良宇) was dismissed in September amid allegations that he and other city officials allowed 3.2 billion yuan government-held pension funds to be illicitly invested in risky real estate and toll road projects.

Top leaders in Beijing have portrayed the crackdown in Shanghai, which is at least partly aimed at consolidating the central leadership's political control over China's commercial hub, as evidence of the ruling Communist Party's determination to combat the nation's rampant corruption.

Earlier this week, Premier Wen Jiabao (溫家寶) convened a meeting of the State Council on the issue, pledging to improve controls over social security fund management.

Local governments managed about half of all social security funds last year, the National Audit Office's report said.

It did not give details on Shanghai.

According to Chinese law, social security funds have to be kept in state-owned commercial banks and managed under designated fiscal accounts. The balance of funds can only be used to buy treasury bonds or placed as deposits in banks, where interest earnings are negligible.

But local political bosses have often sought higher returns through sweetheart deals for businessmen, sometimes using the money to bail out bankrupt businesses for the sake of "social stability."

no stone unturned

The National Audit Office ordered local authorities to resolve any cases of misused funds and reclaim or repay any losses, punish officials involved and report back to the audit office by early next year.

Local branches of the audit office were told to conduct regular audits of social security funds and publish the results.

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