SHANGHAI: Shanghai's largest shopping mall has been linked to a 2.7-billion-yuan (US$337 million) misappropriation of money from the city's pension fund, the Shanghai Securities News reported yesterday.

According to the paper, the Bailian Zhonghuan Commerce Plaza, a 430,000-square-metre shopping centre in the city's Putuo District, is at the centre of a scandal involving a 2.7-billion-yuan (US$337.5 million) loan from the city's pension fund.

A bank lent the funds to Shanghai Dehong Investment Co Ltd in December last year.

The company used the money to buy a 70 per cent stake in the shopping centre from Shanghai Xinchangzheng Group for 1.8 billion yuan (US$225 million). The company then bought a majority stake in Shanghai Xinchangzheng Group.

Shanghai Xinchangzheng had bought its stake for 300 million yuan (US$37.5 million) from Sichuan Xinglida Group.

By buying out Shanghai Xinchangzheng Group, Shanghai Dehong Investment controlled both the property and the profit Shanghai Xinchangzheng Group made from the deal, according to the paper.

Then, in March, Shanghai Dehong Investment sold off a 51 per cent stake in the shopping centre for 2.1 billion yuan (US$263 million) to the Shanghai Brilliance Group, the city's biggest retail group. It has been estimated that the shopping mall, which opened on December 21, is now worth about 6 billion yuan (US$750 million).

Yan Liyan, an investor in Shanghai Dehong Investment, told the Shanghai Securities News that the company had re-paid the money it had borrowed from the city's pension fund. However, a search of the local property bureau's website found that the company's name was still on the shopping centre's mortgage contract. According to the contract, the loan is supposed to be re-paid by the end of 2008.

In September, Shanghai's government found more than 3 billion yuan (US$370 million) from its pension fund, which covers a population of 12 million people, had been invested in highway construction and property deals. By law, pension funds can only be invested as bank deposits or in national bonds or securities.

Several senior local officials and heads of large State-owned enterprises were sacked and investigated in connection with the case, among them the then-Shanghai Party chief Chen Liangyu.

No details concerning who else was involved in the 2.7 billion yuan misappropriation were available. Changzheng Town in Putuo District and the town's Party secretary, Wang Miaoxing, hold shares in Shanghai Xinchangzheng Group.

(China Daily 12/28/2006 page3)