Aug. 8 (Bloomberg) -- Tong Daning, who helped manage China's $26 billion pension fund, has been executed on a charge of spying for Taiwan, the highest-ranking official to be punished for espionage since 1999, according to military analysts.

Tong, formerly a director of China's National Council for Social Security Fund, was executed on April 21, after the Beijing Intermediate Court found him guilty of spying, said Andrew Yang, secretary general of the Chinese Council for Advanced Policy Studies. The execution was confirmed by the Beijing-based pension fund's spokesman Yan Caiping, who did not provide details.

China arrested two colonels of Taiwan's military intelligence service in May, setting back the Taiwanese spy network on the mainland. The governments of China and Taiwan, administered separately since the end of a 10-year civil war in 1949, has been diplomatic and political foes for half a century, bickering over their claims of sovereignty.

``It's been a loss to Taiwan,'' said the Chinese Council for Advanced Policy Studies' Yang in a phone interview today from Taipei. ``Taiwan's spy network has been hurt,'' he said.

Tong's family could not be reached to comment. The name of his lawyer was not made available. Details of Tong's alleged spying activities were not disclosed.

Officials at the Beijing Intermediate Court declined to comment, citing the case as military secret.

Taiwan-China Ties

Espionage between China and Taiwan comes even as the island's residents have invested a larger-than-expected $150 billion on the mainland since 1980, according to a June 20 estimate by Taiwan's President Chen Shui-bian.

China and Hong Kong are Taiwan's biggest export markets, buying $7.7 billion of Taiwan's flat panel displays, cell phones and other products in July, 19 percent more than a year ago. Taiwan's goods are shipped to China through Hong Kong because of restrictions on trade and transportation between Taiwan and mainland China.

About 1 million Taiwanese are estimated to live and work in China, operating businesses from restaurants and hotels to semiconductor manufacturing factories and textile mills.

China Airlines and other Taiwan-based carriers own ventures in China, where they are seeking permission to fly cargo directly across the Taiwan Strait, skipping stopovers in Hong Kong and Macau to save time and cut costs.

Chang Hwa Commercial Bank and other Taiwan-based lenders are also running representative offices in China, where they are seeking to open full branches to tap China's $1.3 trillion in household savings.

Long-term Spy?

Tong worked for China's Ministry of Foreign Affairs for 15 years before joining the country's pension fund, according to Yang, who studies and compares Taiwan's military strength with its rival across the Taiwan Strait.

At the fund, Tong was responsible for running a program that allowed Chinese investors to convert their yuan deposits into foreign currencies for investing abroad, known as the qualified domestic institutional investors plan, or QDII, according to the pension fund's Web site. The Web site did not contain any more information about Tong.

The execution is the first since 1999, when China's military put an army general and colonel to death after they were caught selling details of the locations of China's missiles to Taiwan's intelligence service for $1.6 million.

``What Tong gave to Taiwan intelligence sources isn't clear at this point,'' Yang said.

Propaganda Campaign

Tong's execution has been a set-piece in a publicity campaign by China's state-owned media and government bureaucracy.

The entire staff of the Hunan Meteorological Bureau, taking time off foretelling typhoons and flash floods, gathered on June 22 to watch a 35-minute video clip entitled ``Tong Daning's Spying Case,'' according to a statement on the weather bureau's Web site.

The video was also mandatory viewing on July 24 by medical staff in central China's Sichuan province, whose normal jobs were to teach couples how to use condoms and plan their pregnancies.

The video clip about Tong's case was ``useful in helping us protect state secrets,'' the Sichuan Population and Family Planning Commission said in a July 31 statement on its Web site.

``The Chinese to use the Tong case as a warning to other officials to not spy for Taiwan,'' Yang said. ``It's a case of killing the rooster to scare the monkey.''

To contact the reporter on this story: Allen T. Cheng in Beijing at acheng13@bloomberg.net

Last Updated: August 8, 2006 01:23 EDT