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Let the market decide

China Daily

The retirement of a government-backed conglomerate's chairman has triggered a chain reaction in the banking sector. Upon the departure of Wang Jun, head of the China International Trust and Investment Corp, Chang Zhenming, president of the China Construction Bank (CCB), was moved to fill the vacancy at the end of last month. Zhang Jianguo, chief executive of the Bank of Communications (BoComm), in turn, is set to take the position previously held by Chang.

China's State commercial banks have seen frequent changes in leadership during the past two years. All were sudden, quick changes made by the government, the majority shareholders of all these banks.

The decision-makers have managed to put capable, well-respected people at the important posts.

But the government needs to ponder the way it influences banks' personnel changes in future situations. They should make the process more transparent and allow the boards of the banks to have a bigger say.

Strong leadership is crucial for the banks, especially at a time when they are bracing themselves for fierce competition from overseas rivals. According to its World Trade Organization commitments, China's banking sector is due to be opened up before the end of this year.

When they consider buying into State banks, international investors consider the competence of the banks' bosses in their decision-making.

It is understandable that the government opted for the approach we see now at a time when the final full open-up deadline is just around the corner.

The market also seems to be quite accustomed to changes like moves by Chang and Zhang. After some dips, prices of the banks' shares at overseas bourses have stabilized.

However, that does not mean the market will always accept the government's direct intervention in these banks.

However, seeing a small group of talented people shifted from post to post within the banks as if they are government officials is not encouraging. After all, these banks should be competitors and these kinds of changes raise suspicion there may be conflicts of interests.

The significance of competent leaders cannot be underestimated. But market rules and the importance of sound corporate governance should also be respected. All three are key to the banks' chances of becoming internationally competitive players.

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