According to Mark Frazier, a professor of East Asia political economy at Lawrence University in Wisconsin and a specialist in China pension funds, those decisions had long been an open secret. Facing a pension shortfall and limited by regulations restricting them to low-yielding investments, the fund managers turned to Shanghai property and infrastructure to earn better returns.
Given that Beijing was long aware of this practice, attention has turned to the timing of its purge in Shanghai. Rightly or wrongly, suspicion lingers on a political power struggle between President Hu Jintao and his predecessor Jiang Zemin ahead of a reshuffle at October's annual party conference.
When Jiang stepped down in 2002, his parting gesture was to appoint a number of allies to high office in Shanghai through which he could continue to exert political influence. One of these was Chen Liangyu, the city's top official. Chen is set to be a key figure in the battle to succeed Hu when he steps down, probably in 2012. October's meeting is all about jockeying for position.
While Chen has not been implicated directly in the pension scandal, it is said that the detention and questioning of Qin Yu, the governor of Shanghai's Baoshan district and Chen's former secretary, could be grounds for Hu to bypass the city boss for promotion. This would effectively end his leadership bid before it begins, allowing Hu to pick a successor free of Jiang pressure.
Launching the investigation ahead of the October meeting sends a "clear signal to the Shanghai faction to toe the line and show allegiance to Hu," Joseph Cheng, a China expert at the City University of Hong Kong told Time magazine.
The announcement of a nationwide audit of locally managed pension funds gives the move legitimacy as part of Hu's widely publicized crackdown on corruption. But for that impression to hold, Hu's auditors will need to collect some big name scalps. Otherwise, the Shanghai scandal could go down in history as nothing more than an opportunistic and destabilising power grab.
Call to end arms embargo
Chinese officials called for an end to the EU embargo on arms sales to Beijing ahead of Premier Wen Jiabao's visit to the region in September. Observing that the EU has in the past expressed a desire to end the embargo, Li Ruiyu, deputy director-general of the foreign ministry's European affairs department, was quoted as saying: "We of course hope the EU will honor its commitments and make the political decision to lift the ban at an early date." European nations remain divided on plans to end the ban, which was imposed following the Tiananmen Square massacre in 1989.
Pollution played down
A government report estimated that environmental damage cost the equivalent of 3% of economic output in 2004, but officials and analysts said the real cost was much higher, the South China Morning Post reported. The report, issued by the National Bureau of Statistics (NBS) and the State Environmental Protection Administration (SEPA), was the first of its kind in the mainland. It said it would cost China about US$136 billion to clean up the deteriorating environment, equal to about 7% of gross domestic product in 2004 and much higher than the 1.18% of GDP invested in environmental cleanups between 2001 and last year. Wang Jinnan, chief engineer at the Chinese Academy of Environmental Planning and co-coordinator of the report, told the newspaper the conclusions heavily underestimated the actual situation.
Audit uncovers misuse
Auditors uncovered US$16.3 billion in public funds misspent by 54,000 government units and state-owned enterprises across the country during the first eight months of the year. An anonymous source at the National Audit Office (NAO) told state media that 38 party and government leaders and 92 officials had been reported to judicial authorities for "bearing direct responsibility" for the misappropriation of more than US$755 million. According to an NAO report published in September, no central government ministries or organizations were found to be clean of financial malpractices. These ranged from budgetary abuses to spending state funds on staff housing.
Doubts on Ching hearing
An appeal by Hong Kong journalist Ching Cheong against a five-year prison sentence for leaking state secrets and military information may not be heard, Ching's lawyer told a gathering of China University of Politics and Law alumni in Hong Kong last month. He Peihua said that if Beijing's Supreme People's Court believes the facts and evidence given in the earlier trial at the Intermediate People's Court of Beijing are not in dispute, the appeal could be denied. A state-backed newspaper claimed on its website that Ching, chief China correspondent for Singapore's Straits Times, confessed during pre-trial court proceedings that he knew Taiwan's Foundation on International and Cross-Strait Studies was a spying agency when he offered it confidential material in 2004 in return for US$38,500.
Bird flu samples withheld
China said delayed talks over protocol are responsible for its failure to hand over bird flu samples taken from poultry since 2004 to the World Health Organization (WHO). Scientists want the samples to study the development of the H5N1 virus to make drugs and vaccines while tracking changes that may make the disease transmittable from human to human. Beijing promised in March to hand over samples taken from poultry to the WHO and has already handed over strains of the virus found in humans, but not poultry samples.
Abe backs China talks
Japan's Chief Cabinet Secretary Shinzo Abe, who was favorite to succeed Prime Minister Junichiro Koizumi going into September's Liberal Democrat Party (LDP) leadership elections, said that top-level talks with China and South Korea must resume if ties are to improve. Abe told a conference of the ruling LDP that relations between Beijing and Tokyo must not be based on emotions. He said that, if elected prime minister, he would express his disapproval to Chinese leaders at their refusal to engage in talks as long as Japanese leaders visit the Yasukuni shrine, which honors several class-A war criminals alongside war dead.
Summit gives image lift
China's presence as an observer at the Nonaligned Movement summit in Havana gave it an opportunity to boost its economic and political clout in Latin America at the expense of the US, analysts told AP before the event. The US had declined a similar invitation to attend as an observer. A Chinese delegation had bilateral meetings with a number of Latin American countries on the sidelines of the summit.
Local authorities blamed
Protectionism by local governments was responsible for two serious industrial pollution incidents discovered last month, the deputy director of the State Environmental Protection Administration claimed. Pan Yue made the remarks after the discovery of severe lead poisoning in northwest China's Gansu province. At the time of writing, at least 877 people from two villages, including 334 children under 14, had tested positive for excessive amounts of lead in their blood since August. At least four children are likely to suffer permanent brain damage, AP reported. The pollution was traced to a smelting plant said to have received and ignored several warnings from environmental officials. Separately, two factories in Hunan province were found to have been dumping arsenide and other pollutants into a river for at least a year. Officials in Yueyang county had to shut off water supplies to 80,000 people in the area for four days.
Age set to slow growth
China may face steeper labor shortages as the working-age population declines, Cai Fang, a director at the Chinese Academy of Social Sciences, told state media. The number of Chinese above 65 years of age has already hit the 100 million mark. To sustain the current levels of economic development the country will have to move away from labor-intensive growth and find a way to deal with the ageing population, Cai said. Between 2005 and 2030, China's working-age population is set to grow at an average of 0.4%, far lower than the worldwide average of 1.2%, according to the United Nations. At the same time, the number of people aged between 50 and 64 will increase by 67%.
China denies proliferation
US accusations that China had allowed the transfer of ballistic missile technology to Iran and North Korea and that it might be developing chemical and biological weapons were denounced as "baseless" and "irresponsible" by China's foreign ministry. Two senior US officials criticized Beijing for allowing state-owned companies to become "serial proliferators" of technology and equipment related to weapons of mass destruction. "Especially in the proliferation area, China's actions seem to us dangerously short-sighted," Peter Rodman, assistant secretary of defence, told the US-China economic and security review commission. China's foreign ministry said the country had achieved marked success in anti-proliferation work through legislation, administrative action and education of local companies.
Drought won't hit grain
China's grain output will not be diminished despite the fact that southwest China is experiencing its worst drought in 50 years, an official at the China Meteorological Administration said. Five million tonnes of grain, about 1% of China's annual grain output, were lost as the drought hit 3.2 million hectares of cropland in Sichuan province and Chongqing municipality. But the official said the strong summer harvest, which yielded 7 million tons more than last year, would more than make up for the shortfall. Most of north China was expected to have a good harvest this autumn which would also help to make up for the drought damage, the official added.
Lebanon force boosted
Premier Wen Jiabao announced China would increase its peacekeeping force in Lebanon to 1,000 personnel from around 240 at present. Speaking at a briefing in Beijing, Wen also said China would give Lebanon US$5 million in humanitarian assistance, but this pledge includes the US$2.5 million that has already been sent to help the troubled country.