BEIJING -- Concerns have arisen over the management of social security funds in China following a scandal in which a Shanghai municipal official, who was responsible for the city pension fund, is being investigated on charges of receiving bribes.
Zhu Junyi, director of the Shanghai Municipal Bureau of Labour and Social Security, has been stripped of his post while the investigation continues. He is suspected of misconduct involving a 3.2-billion-yuan loan of city funds to toll road operator Fuxi Investment Holding Co.
The social security fund has been growing at an annual rate of 20 percent in China. And the fund had exceeded 1.8 trillion yuan (about US$230.44 billion) by 2005, accounting for 10 percent of the country's gross domestic product (GDP) for the same year, according to the Chinese Ministry of Labor and Social Security.
In the meantime, the country has also set aside 200 billion yuan as the strategic reserve for the national social security fund. And corporate annuities from 24,000 profit-making enterprises across the country have surged to 68 billion yuan.
"As the country expands its reform of the pension insurance system, the social security fund has been snowballing, so the task to supervise and manage the fund will remain arduous," said an official with the ministry.
According to the official, who asked not to be identified, at least 16 billion yuan out of the massive social security fund have been embezzled since 1998.
"Some of the embezzled funds can never be recovered," said the official.
Under China's current social security framework, working employees are entitled to benefits of five main insurance programs - pension, unemployment, medical treatment, injury at work, and pre-and postal-natal care if the employees are female.
Apart from funding by the government, the social insurance programs also receive contributions from both employers and employees, who put into the funds every month.
He Ping, head of the China Academy of Labor and Social Security, said, "A noticeable problem with the social security fund is the investment and operation aspect," said He, who shunned purchases of the state treasury bonds citing low returns of less than two percent.
In the past, large sums from the social security fund were placed with major banks. But as the savings deposits from ordinary people have continued to rise, banks have showed reluctance to taking in deposits at a negotiable rate, He said.
He suggested experiments should be made in investing social security funds in highly lucrative business sectors such as transportation, power development, petroleum or even in construction of some major infrastructure projects, since the country's fledgling capital market is volatile and risky.