The announcement comes as the Chinese government revealed during an anti-corruption conference that more than 17,500 officials have been punished for corruption this year.

Ling Baoheng, 51, director of Shanghai's state-owned assets supervision and administration commission, and Wu Hongmei, a vice director at the same commission, are "assisting the investigation", officials said.

Ling and Wu are among dozens of officials and businessmen implicated in a scandal over the alleged misuse of money from Shanghai pension and housing funds by the commission.

 

The commission oversees several major city projects targeted in the probe, including the city's Formula One auto racing track.

 

Scandal

 

As head of the city's assets commission, Ling was involved in the restructuring of several major state-owned corporations, including equipment maker Shanghai Electric Group, whose chairman and other senior officials are also under investigation.

 

[Corruption is] a top priority, a pressing task that has great influence on the overall development of the country

Hu Jintao, Chinese president

Shanghai's Communist party secretary, Chen Liangyu, was dismissed and also expelled from the party's powerful executive last month in connection with the scandal over alleged misuse of more than $380 million in pension funds.

 

The government has announced only one other arrest so far, that of tycoon Zhang Rongkun, whose Fuxi Investment company was alleged to have used pension funds for investments in toll roads and other projects.

 

'Top priority'

 

China's top leaders have been stepping up anti-graft investigations, often targeting local officials viewed as potential political rivals.

At the conference in Beijing, chief prosecutor Jia Chunwang said that, if not controlled, corruption could "undermine democracy and the rule of law and engender an increase in organized crime and terrorism".

During a conference speech Hu Jintao, the Chinese president, said that the government saw the fight against corruption as "a top priority, a pressing task that has great influence on the overall development of the country".

Chinese officials have also urged other governments to co-operate in handing over suspects who flee the country, the state-run newspaper China Daily said.

However many governments lack extradition treaties with Beijing, and some object to repatriating suspects who could face the death penalty.