Document Type
Book Chapter
Publication Date
2009
Abstract
In the wake of the Asian Financial Crisis of 1997-98, and accelerating after 2003 the People's Republic of China (PRC or China) has implemented an ambitious reform program directed at the commanding heights of what once pa ed for China ' financial system-the large state-owned and state-managed commercial banks. Contrary to a good deal of advice offered by policy and finance specialists, China did not liquidate or fully privatize these institutions. Instead, the PRC sought to avoid the significant social (and no doubt political) cost associated with liquidation, or real privatization, by instead changing (1) the internal dynamics of, and (2) external environments applicable to, its behemoth banking institutions.
This chapter focuses on a relatively narrow aspect of the legal and regulatory sub-theme of China' commercial bank reform program: the law- and enterprise organization-based approach that has sought to change (1) how Chinese banking firms are governed internally and (2) how firm managers are monitored externally by shareholders-the national "owners" of the firm. In doing so, this chapter strives to: illuminate how China's banks are governed even after formal and institutional reform the effect of widely touted legal governance adjustment and the ways in which the individuals who really control commercial banking firm are monitored and held accountable-or not-in China's truly "mixed" socialist-market economy. Thus, this chapter is (1) a rebuttal to literally counties theoretical writings and public proclamations about the tie between "modern" or "international standard" firm governance reform on one side, and re ulting bank performance on the other (Ba el 1999: 3). It is (2) a rebuttal to the many regulators, officials, analyst participants, and investors who, knowing far better, pronounce that the internal firm governance reform at China's state-owned bank is basically "complete" while counseling a renewed focus on firm external measure (tax policy creditor protection and bankruptcy law and enforcement, interest rate policy, reserve requirements, and so on. (Xie Ping 2006: 20)). Finally this chapter may rand a a warning a to how easily and incompletely observers and investor Chinese and foreign) digest and credit proclaimed legal change, and overlook other perhaps more effective instruments of monitoring and corporate governance.
This chapter places some emphasis on the tock price of China's listed banks at a time when public tock valuations for Chinese listed companies do not yet reflect firm performance (a opposed to the overall promise of "rising China" and herd-mentality participation in "China plays"). Notwithstanding, the existence of a reported stock price will be shown to have significance in China, where the formal corporate governance mechanism introduced here and widely hailed in both offering prospectuses and the international financial press, may prove somewhat irrelevant. The irony of course is that the true corporate governance mechanism shown to be effective are thoroughly rooted in a pre-Reform vis ion of stateowned enterprise (SOE) and work unit (danwei) governance-the nomenklatura system-that may now evidence a strangely benign, or at lea t unforeseen, entanglement with the decidedly post-Reform phenomenon of semi-efficient international and domestic capital markets.
Publication Information & Recommended Citation
Howson, Nicholas C. (2005- ). "China's Restructured Commercial Banks: Nomenklatura : Accountability Serving Corporate Governance Reform?" In China's Emerging Financial Markets Challenges and Global Impact, edited by Z. Min et al., 123-63. Singapore: John Wiley & Sons (Asia), 2009.