(Xinhua)
Updated: 2007-01-28 11:46

Shanghai Mayor Han Zheng (R) chats with Gong Xueping, chairman of the Standing Committee of the Shanghai People's Congress at the city's 12th people's congress in Shanghai January 28, 2007. Han said all embezzled social security fund has been recovered. [newsphoto]

Shanghai Mayor Han Zheng said Sunday the city has retrieved all the money that was siphoned off the Shanghai social security fund for illicit loans and investments last year.

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"We have secured retrieval in full of the embezzled social security fund," Han said in his government work report to the municipal parliament session.

Shanghai's social security fund scandal that was exposed to the public last year involved 3.7 billion yuan (US$474 million), including 3.45 billion yuan (US$442 million) in principle and 250 million yuan (US$32 million) of interest, reliable resources attending the session said.

The embezzled money was earlier estimated to be around 3.2 billion yuan (US$407.6 million).

Investigators found the money had been illegally loaned, by a company of the municipal labor and social security bureau, to Shanghai Feidian Investment Development Co Ltd, a company controlled by business tycoon Zhang Rongkun, number 16 on the Forbes China Rich List in 2005.

Zhang was the first person arrested in the Shanghai social security fund scandal, which also brought down Shanghai's former party chief Chen Liangyu.

Chen was sacked for his alleged involvement in the scandal by the Central Committee of the Communist Party of China on September 24.

"Chen's sacking demonstrated the CPC Central Committee's firm determination to combat corruption," said Han, also acting secretary of CPC Shanghai municipal committee, in his report Sunday. "We must step up the anti-graft drive and build a clean government to win the trust of the people."

Following Chen's downfall, a growing number of officials and business people have been ensnared in the probe, including Shanghai's former labor and social security chief Zhu Junyi, former director in charge of the city's state assets management Ling Baoheng and two district governors.

Former head of the National Bureau of Statistics Qiu Xiaohua has also been accused of taking bribes in connection with the scandal and was expelled from the CPC earlier this month.

In the wake of the scandal, Shanghai set up a working panel to help the central government investigators trace the misappropriated fund, said Han.

He said Shanghai had a lesson to learn from the pension scandal. "It revealed systemic defects and management loopholes. We must take the problems seriously, draw a lesson and improve our work."

In the wake of the scandal, he said the Shanghai government had given top priority to the fight against corruption, tightened supervision of officials and improved transparency.

"We have to strengthen the supervision system, follow closely established rules and procedures and check power abuse to prevent a recurrence of such scandals," said Han.

Shanghai's new regulation on social security funds management, which was promulgated last November, stipulated the setting up of independent income and expenditure accounts as well as third-party supervision.

Earlier this month, the municipal government announced it had chosen the Shanghai branch of a leading Chinese commercial bank -- the Industrial and Commercial Bank of China -- to manage the city's social security funds.

The new system features independent supervision of money management, and three separate accounts -- an income account, an expenditure account and a special account -- will be opened at the bank to manage Shanghai's social security funds, which are huge given the permanent population of more than 12 million.

In the past, the funds were managed through a single income account. Local social security authorities made decisions about revenue, withdrawal and payment of funds, which made it relatively easy for corrupt administrators to embezzle money.