Authorities are investigating a former housing fund director accused of embezzling up to 253 million yuan (US$31.2 million).

Liu Xiangyang, former director of the Public Housing Fund Management Centre in Hengyang, Hunan Province, was arrested early last month, Beijing-based China Youth Daily reported yesterday.

A clerk from a company called Xiangcai Securities was also taken into custody, the newspaper said.

The municipal government has frozen the company's assets, worth 30 million yuan (US$3.7 million), and formed a special investigation team.

Hengyang Vice-Mayor Lei Liangyu told China Youth Daily that suspected embezzlement of the housing fund by Xiangcai Securities had been uncovered in July. The company is alleged to have used the money to buy treasury bonds.

"We found the money had gone when we went to settle with the company," Lei said. "Now we are not sure what the money was used for."

Hengyang's prosecution department yesterday refused to comment on the situation.

To protect the value of housing funds against inflation, governments allow housing fund management centres to buy treasury bonds with the money earmarked to help citizens buy private houses.

Under Chinese laws and regulations, housing fund management centres are non-profit institutions supervised by construction, finance and auditing departments and even banks. Wang Yongzhi, director of the auditing bureau of Hengyang, said the centre currently needs the auditing department's approval if it intends to handle more than 500,000 yuan (US$61,700).

However, money from the funds can be misappropriated. Last month Li Shubiao, a former director of the Public Housing Fund Management Centre in Chenzhou, Hunan, was sentenced to death for embezzling about 120 million yuan (US$14.8 million).

(China Daily September 23, 2005)