The unearthing of a US$400 million pension corruption scandal in Shanghai late last week came as no surprise to many Chinese.   

When it comes to matters of finance and investment, our research has shown that Chinese consumers have high trust levels for well established foreign financial brands over many home-grown institutions for this very reason.

While the latest scandal did not involve a bank, there is certainly an entrenched belief among middle-class Chinese that power tends to corrupt, and those who wield power in a financial sense often make sure they and those around them are able to ‘wet their beaks’ in the course of doing business.

Last week’s incident saw one of China’s richest men and a senior Shanghai official (a scapegoat perhaps) implicated in the affair that allegedly involved the siphoning of funds from the “Paris of the East’s” social security system, which looks after more than 10 billion Renminbi (US$1.25 billion).

In response, Beijing sent 100 investigators to Shanghai to look into the scandal – yes, 100 exactly! – not 99 or even 101, but 100.

A nice round symbolic figure perhaps to demonstrate the Government’s genuine intent to crack down on such self-serving behaviour?

However, the more cynical among us may suggest that the exercise is more to do with politics and merely Chinese President, Hu Jintao, flexing his muscles to ensure all the pieces are in place that would allow him to appoint his own successor when the Chinese Communist Party holds its five-yearly Congress in late 2007.

If the latest corruption scandal is just political grandstanding then one would be inclined to believe a much greater level of ‘grafting’ exists beyond this very public case.

Finance, investing, and saving for retirement is all about confidence and trust, and until the Chinese public can truly trust those empowered to hold and manage their money the financial services industry in the Middle Kingdom will never reach its full potential.

Richard Smith

www.thefinancezone.co.uk

0845 226 9106

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