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Shanghai's sweltering August temperatures usually keep visitors to a minimum, but more than 100 officials from Beijing descended on the city last week—and they were bringing heat of their own. Investigating what state media have dubbed Shanghai's biggest financial scandal in years, the Beijing audit team is probing allegations by the central government that the city's already undercapitalized $1.25 billion pension fund may have been used to illegally finance various business deals and speculative real estate projects. Among those hit by accusations of bribery or improper loans are Zhu Junyi, the pension fund's supervisor and a member of China's parliament; Zhang Rongkun, one of the nation's richest men; and Qin Yu, former secretary to Chen Liangyu, Shanghai's top Party official. The growing scandal comes as China's President Hu Jintao has intensified his campaign against corruption, instructing government officials and their families to report any property transactions, business holdings and foreign travel to the Party.

But the investigation may also signal a power play by Hu ahead of the Communist Party's annual confab in October. His predecessor, Jiang Zemin, hailed from Shanghai and seeded the government with protégés including Party boss Chen, who had been mentioned for possible promotion to Beijing. A hometown scandal could weaken the influence of the so-called "Shanghai gang," allowing Hu to install his own acolytes in positions of power. "The Chinese leadership understands that releasing the details of corruption in Shanghai just before the October meeting will have a big impact," says Joseph Cheng, a China expert at City University of Hong Kong. "It's a clear signal to the Shanghai faction to toe the line and show allegiance to Hu." If they don't, the heat could get unbearable.

• By Hannah Beech
• A scandal in Shanghai could help China's President consolidate power