By Zhu Qiwen

The swift action Hong Kong's Independent Commission Against Corruption took against Skyworth Digital Holding's executives provides much needed food for thought not only for mainland enterprises but also market regulators.

The chairman and an executive director of Chinese television maker Skyworth Digital Holdings were charged by Hong Kong's anti-corruption watchdog on December 1 of allegedly misappropriating over HK$48 million (US$6.18 million) in company funds.

Although the Skyworth suspects were released on bail two days later while their case was adjourned, the dramatic event has had enormous repercussions on the mainland market.

Many Chinese businesses now leave no stone unturned in getting themselves listed. Lax supervision of the domestic stock market has led listed and to-be-listed companies to treat the market as a cash cow.

The Skyworth scandal explicitly demonstrated that such ideas will not work in a sound capital market.

As one of the leading TV makers on the Chinese mainland, the company and its chairman had enjoyed a fairly good reputation among the domestic market and consumers.

It is surprising that even such a major company could be involved in illegal activities like the misappropriation of company funds, although further investigations are required.

The Hong Kong authorities were firm and fast in taking necessary action to bring any transgressor to justice.

Clearly, local authorities fully understand that credible regulation is the key to the success of Hong Kong, a major international financial centre.

But does the same hold true for the mainland regulators? This is one of the pointed questions shareholders are fully justified to ask the China Securities Regulatory Commission (CSRC), whose vow to protect investors' interests and rights has often failed to materialize.

In comparison with the colossal amount of funds some parent companies have misappropriated from their listed branches, the Skyworth case was not even worth mentioning.

Given the immaturity of the mainland stock market and the complex nature of the reform of State-owned enterprises, it is true that the CSRC still has little elbow-room in effectively punishing those perpetrators in the absence of strong judicial support.

Admittedly, it will take time to perfect judicial and law-enforcement work to allow the securities watchdog to show its teeth.

To restore investors' confidence in the underdeveloped mainland stock markets, the domestic regulatory watchdog has much to learn from its counterpart in Hong Kong.

(China Daily December 6, 2004)