Police have swooped on 14 people suspected of siphoning compensation money away from the largest Sino-foreign petrochemical project in China.

They were being questioned in Huizhou, a city of South China's Guangdong Province, following their arrests.

The US$4.3 billion project with 50 percent Shell investment is going on as scheduled.

The suspects - mainly township and village officials - were suspected of defrauding the local government of a large sum of money that was set aside for farmers as compensation for the loss of their land and property.

An official from the Huizhou Commission for Discipline Inspection of the Communist Party of China said the 14 were being investigated on suspicion of exaggerating property and the number of fruit trees in order to gain more compensation from the local government.

The case has involved a total of 63 people - most of them local villagers.

They were suspected of teaming up with local township officials to defraud the government of the compensation money, the official said.

Investigators have recovered more than 13 million yuan (US$1.57 million) in economic losses.

The official said the case did not involve misappropriation of the project's construction funds which came from overseas and Chinese investors.

Local governments planned to offer more than 4 billion yuan (US$481.93 million) in compensation to farmers and invest in the construction of highways, water and electricity supply facilities and other infrastructure facilities, the official said.

"The case does not really affect the progress of the project," the official said.

The project will begin construction this year as scheduled, the official said. It will be built jointly by the China National Offshore Oil Corporation and Shell Chemicals, a member of the Royal Dutch/Shell group.

Irregularities first came to light in April when departments under the Huizhou municipal government received complaints from local residents.

(China Daily February 17, 2003)