Shortcomings in China's Corporate Governance Regime

By Johnny KW Cheung of American International Group

China has made many positive improvements to its corporate governance structure in recent times by revising its securities and company laws. Notable changes include greater financial disclosure requirements, improved protection of minority shareholders' rights and clearer guidelines on the role of supervising boards.

Significant progress has also been made in improving corporate governance in both the banking and equity markets. Foreign banks are now allowed to invest in PRC banks and to bring with them their corporate governance concepts. The government has also introduced a share reform programme, making it mandatory for non-tradable shares in state-owned enterprises (SOEs) to be converted into tradable shares. Efforts have also been made to decrease financial risk in China's banking system by reducing the large number of non-performing loans held by local banks.