Chinese anti-corruption officials have turn their sword to the financial industry and taskforce from related central government departments will be stationed in big state-owned commercial banks on an auditing mission this year.

"Central government leaders also issued concrete directives to persons in charge of financial institutions to cooperate with the taskforce," disclosed an official with the Communist Party of China's Central Commission for Discipline Inspection, attending the on-going annual session of the national legislature, on condition of anonymity.

Banking industry insiders acknowledged that corruption in the financial industry may be more destructive to the country's financial security than other problems.

Song Xingguo, head of the central bank's Shenyang Branch, listed non-performing loans (NPL), or bad loans, as the main source of corruption in the financial industry.

Statistics show that the outstanding NPL of major Chinese banks remained at 2.44 trillion yuan (US$289.96 billion) at the end of last year, with an NPL ratio of 17.8 percent, though the sum had been reduced. The big four solely state-owned commercial banks accounted for 1.91 trillion yuan (US$230.76 billion),with an NPL of 20.36 percent.

Song and many other legislators at the annual session who showed great concern on the issue expressed satisfaction with what the government has done to fight financial corruption.

Last month, Liu Jinbao, vice president of the Bank of China, one of the Big Four, was removed from his post for being involved in a case of economic crime, becoming the highest ranking banking official thrust down by the anti-corruption sword following Wang Xuebing, former governor of the Construction Bank of China. Wang was sentenced to 12 years imprisonment last year on a charge of accepting bribes worth 1.15 million yuan (US$139,000) in 1993-2001.

The punishment of the senior banking officials shows "the government is stern and serious with corruption involving banks," said Gai Ruyin, a national legislator and mayor of Daqing City in northeastern Heilongjiang Province.

The lawmakers at the session agreed that the establishment of the China Banking Regulatory Commission last year meant a good beginning of the government move against corruption in the banking sector.

Early this year, the government decided to inject US$45 billion into two of the Big Four, Bank of China and Construction Bank of China, to support their restructuring into joint-stock commercial banks. One of the objectives of the reform is to establish a sound corporate governance structure and strict internal control system.

Similar reform is also going on in other Chinese banks.

According to Xie Ping, director of the central bank's Research Bureau, the root cause of financial corruption lies in the monopoly of scarce resources. He urged efforts to promote market-oriented banking reform, saying it is a fundamental means to fight corruption in the financial industry.

(Xinhua News Agency March 12, 2004)