The pension fund scandal in Shanghai has highlighted the serious lack of supervision and transparency in such massive public undertakings.
This has been considered the largest case of corruption in Shanghai since the country started its economic reforms in 1978.
A team of more than 100 sent by the central government has been conducting deep investigations into the case, which has already involved high-ranking city officials and business executives.
Zhu Junyi, the high-profile director of the Shanghai Labour and Social Security Bureau, has been sacked for misuse of the fund. He was also expelled from his position as a National People's Congress deputy.
No investigation would be complete without a deep probe into private businessman Zhang Rongkun. Zhang reportedly bribed Zhu and other officials and borrowed 3.2 billion yuan (US$400 million) from the city's 11-billion-yuan (US$1.37 billion) plus pension fund to buy highway operating rights.
A dozen property developers with strong government ties have also been found borrowing heavily from the pension fund to finance their speculative projects, which have helped send Shanghai's real estate prices sky high.
As the complicated scandal unfolds in the coming days, weeks and possibly months, no one knows who will be the next corrupt official exposed.
For years, Shanghai has been regarded as a national role model for managing social security funds. This scandal has crushed that illusion.
Misuses of social security funds were also reported not too long ago in Henan, Heilongjiang, Zhejiang, Sichuan and Hunan provinces.
A lack of transparency has proven to be the obvious cause of the scandals, as in many other cases of corruption involving government officials.
The general public today simply has no way of knowing what's happening with the huge amount of money they will depend on to support the rest of their lives.
There have been no detailed annual or semi-annual reports about the pension fund that matters so much to social stability, a pet phrase for many officials.
This is especially true since Shanghai, with 20 per cent of the population over 60 years old, is the fastest-ageing city in China. The long lines of senior citizens in banks withdrawing their pensions each month are a clear reminder of the importance of the pension fund.
These pensioners have every right to know when their life savings have been invested in the highly speculative property market or other business, since the central government only allows pension funds to be invested in buying treasury bonds and put in bank savings.
Of course, officials like Zhu, who allegedly took bribes, are just used to deciding everything by themselves. They have no idea about informing the public before any major decisions. And in Zhu's case, he would do everything possible to prevent public knowledge of the misuse.
Yes, there is heavy pressure to increase the value of Shanghai's pension fund, which has suffered shortfalls for years. And some of the investments may have raked in handsome profits. But all this does not justify the use of the fund for illegal lending, which puts the fund at great risk.
The Shanghai scandal also reveals a serious lack of supervision that is essential for pension fund security. No one questioned the lending of a third of the city's pension to a private businessman.
In most Chinese cities, the labour and social security bureau is both administrator and operator of the pension fund. There is simply no independent professional institution monitoring and auditing the fund.
China's immature social security net has already found it hard to cope with a rapidly ageing population. Redoubled efforts are needed to ensure the pension fund's safety.
(China Daily 09/07/2006 page4)
