China's biggest corruption scandal involving public pension funds was uncovered and swiftly dealt with, when Zhu Junyi, a senior Shanghai official accused of having misappropriated 3.2 billion yuan in public funds, was expelled from the Standing Committee of the National People's Congress, China's top legislature, on August 27.

Zhu, 55, former head of the Shanghai Municipal Labor and Social Security Bureau, was dismissed from his post in mid-July, and is currently under investigation on charges of taking bribes and misappropriating pension funds under his direct supervision.

The scandal was exposed at Fuxi, a privately run investment company, which sounded the alarm after seeing credit default on a large scale earlier this year. On initial investigation, it transpired that Fuxi had, starting in 2002, paid a multibillion yuan figure for the rights to operate several toll highways in east China. Zhu is accused of loaning 3.2 billion yuan of public pension money to Fuxi without authorization, to finance the purchase.

However, China's public pension funds are currently only allowed to invest in treasury bonds and securities, and are barred from all other channels of investment. The embezzlement accounts for nearly one third of Shanghai's total pension fund assets of 10 billion yuan.

A 100-strong special investigation team from Beijing has been sent to Shanghai to probe into the pension graft, which also involved Fuxi Chairman Zhang Rongkun, as well as several local business people and former head of Baoshan District, Qin Yu.