Audit Finds Massive Fraud in China’s Social Security Fund

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From the NY Times... SHANGHAI, Nov. 24 — China said today more than $900 million was misappropriated from the nation’s $37 billion social security fund in the latest massive government fraud to be uncovered. The government did not announce any arrests or even lay blame for the wrongdoing, but it said an audit revealed that most of the money had been siphoned off for foreign investments, building projects and commercial loans. The country’s social security fund was created in 2000 to help the government cope with its massive and aging population, and to provide a cushion in a country where the gap between the rich and the poor has widened dramatically in recent years, despite a long running economic boom. The report comes at a time when China has embarked on one of its most serious crackdowns on government corruption in decades. In September, the government sacked Chen Liangyu, the Shanghai party secretary and a member of the Politburo, after a government investigation determined that he was implicated in the misuse of social security funds in Shanghai. Since then, several other government and business leaders have been arrested or called in for questioning in a widening probe of official wrongdoing involving bribery or stealing government funds. Some experts say the ongoing corruption investigations are being used as a political weapon to remove government officials who are not loyal to President Hu Jintao. But most analysts also say that corruption is endemic here and that it is threatening the country’s prosperity. “The social security fund is the key to the stability of the society,” said Zhu Lijia, a professor of public administration at the National School of Administration in Beijing. “This affects a large number of retirees and unemployed workers who live on the money. That’s why there have been huge disturbances in various places.” The social security fund fraud was uncovered by the national audit office, which for the past few years has been systematically scrutinizing the books of government agencies and institutions and then releasing its findings to the public. The “audit storm,” as it has been dubbed in the state-controlled press here, has uncovered a stunning degree of corruption in the nation’s biggest banks, hospitals, ministries and even in smaller departments, like the lottery division of the national sports body. Last year, for instance, the National Audit Office said that more than $35 billion of government money was misused. The government also said it handled 147,000 corruption cases last year and that regulators had uncovered more than $60 billion in “irregularities” at the big four state-owned banks. Still, after huge government bailouts, three of the big four state owned banks have gone public in Hong Kong in the past 14 months. The National Social Security Fund invested in several of those public offerings and earned about $7.5 billion on its investments, according to a report earlier this month by Xinhua, the official state run news agency. But last year, the social security fund managed to cover only about 43 million people in China, a country that today has more than 220 million people over the age of 60. By 2040, that figure is expected to nearly double, reaching about 400 million, according to the United Nations. *** Yowch, that's a lot of money! I hope the corruption cleansings are genuine and not just a smokescreen for President Hu to get rid of dissenters among the officials. It'd be nice if the Chinese officials could work together to take care of this aging population, which is a problem they created (with the one-child policy, which had to come about as a result of Mao urging families to have 6 or more children to help the revolution). It's really a shame that this is the current state of events.