London Stock Exchange's deputy chairman Ian Salter met Monday here with Georges Ugeux, group executive vice president, international of the New York Stock Exchange, to offer ideas to China for corporate governance of local listed companies.
Their counterparts from world's leading investment banks, like Goldman Sachs, UBS Warburg Asia and Morgan Stanley, also appeared at a two-day conference on corporate governance of China's listed companies Monday in Beijing, sharing their knowledge with Chinese financial experts and officials.
"Chinese listed companies are in desperate need of improving their corporate governance as China's capital market is suffering some problems from the old economic system and struggling to survive the economic globalization," said Zhou Xiaochuan, chairman of the China Securities Regulatory Commission (CSRC), the administration that invited the prestigious group to Beijing.
"The situation in China is unique and requires special solutions," said UBS Warburg Asia's chairman Rodney Ward. "The majority stocks of many local listed companies are held by the state so that the managers usually also act as the company's owner. The situation sometimes is not good for other investors."
"And a number of listed companies are carved out from a larger group and their parent groups still retain majority control, which makes the relationship much more complicated," he added.
Zhou Xiaochuan also noted that in some private companies in China, the family owners hold the majority control, like some in other Asian countries, which also leads to the same problems facing the state-owned enterprises.
Ian Salter's suggestion was that Chinese listed companies should develop transparency, that is, let investors know the true state of the companies, so as to inspire trust among investors.
"China also needs to have totally independent directors that have the knowledge to help and guide the company with," Ian added.
CSRC announced guidelines for listed companies to establish independent directors in August.
According to the guideline, the board of a listed company is required to have at least two independent directors by June 30, 2002, and independent directors must account for at least one- third of the board by June 30, 2003.
Experts attending the conference also noted that the Chinese society has not totally developed the understanding that the interests of investors -- especially small investors -- must be protected. "It takes time," Zhou Xiaochuan said.
Investors' awareness of self-protection needs to be improved as well, said Zhu Congjiu, general manager of the Shanghai Stock Exchange.
China now has more than 1,150 listed companies, most of which were state-owned enterprises.
(Xinhua News Agency 09/10/2001)
