Chinese authorities have made their first known arrest in a corruption scandal involving Shanghai's social security funds, detaining one of the country's richest men.

Zhang Rongkun, chairman of Fuxi Investment Holding Co., has been arrested, the private investment firm said in a one-sentence statement obtained yesterday. Company spokesmen could not be reached for comment.

Ranked China's 16th richest man by Forbes magazine last year with an estimated net worth of $605 million, Zhang was being investigated for alleged impropriety involving a 3.2 billion yuan ($405 million) loan of city funds to build a toll road.

Fuxi did not describe the charges against him, but the official Shanghai Securities News said he was suspected of crimes including corruption and fraudulently issuing corporate bills.

Over a dozen senior city officials and businessmen, including the head of Shanghai's Communist Party, have been detained, dismissed or ordered to assist the investigation over the past three months. Zhang is the first known arrest, which involves criminal charges.

Zhang, believed to be still in his early 30s, rose from obscurity early this decade to become a key figure in the clique of officials and wealthy businessmen running Shanghai.

A non-executive director of China's top power gear maker Shanghai Electric Group Co., owning a stake of about eight per cent, he was first implicated in the scandal in July.