State-held firms faring better in China

By Li Xiang (
Updated: 2011-06-22 13:46
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BEIJING - Private capital is retreating from China's top 100 listed companies, while State-held enterprises are on the rise, according to a recent report.

Among the top 100 listed companies based on market value as of June 2010, 86 percent of companies have the State as the major shareholder, and 32 percent have the State as the second-largest shareholder, a report on corporate governance conducted by the global risk management consultancy Protiviti and the Chinese Academy of Social Sciences showed on Tuesday.

Private capital controls only 29 percent of the companies as their second-largest shareholders. The number was 48 percent last year, the report showed.

"The result reflects that private enterprises are experiencing a hard time, while State-owned enterprises often enjoy favorable policies or a monopoly in their areas," said Lu Tong, a professor at the Chinese Academy of Social Sciences.

Meanwhile, the report showed that financial companies continue to lead in corporate management, outperforming non-financial companies in all sections of the assessment, which included information disclosure and transparency, responsibilities of the board of directors, responsibilities of the board of supervisors, role of stakeholders, shareholders' rights and fairness to shareholders.

China Merchants Bank was crowned the best corporate management performer among the top 100 Chinese listed companies, while Suning Appliance Co, China's largest home appliance retailer, was ranked the top among non-financial enterprises.

"Building effective corporate governance is the biggest challenge faced by Chinese enterprises," said Christopher Low, president of Protiviti Greater China.

The overall performance of corporate governance has improved but problems still exist in areas such as effectiveness and independence of boards of directors and supervisors, Low said.

"The problems we discovered are often closely tied with a company's financial report, its auditing practice and the entire internal control system. We need to make even greater effort to improve corporate governance," he said.