The China Impact
May 23rd. 2007
Corporate Governance:
China’s Footprints and the Road Ahead
GAO Xiqing
National Council for Social Security Fund P.R. China
Outline
1: the footprints
- institutional evolution of China’s corporate governance
- the development of private sector
- performance of corporate governance
2: the way ahead
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1.1 Institutional Evolution of China’s Corporate Governance
1.1
1872
First Joint Stock Company: China Merchant Group
1904
Code of Corporations
1929
Company Law
1946
Amendments of Company Law
1950’s
Abolition of all laws in the old regime
and de facto nationalization of all industrial & commercial enterprises
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1.1 Institutional Evolution of China’s Corporate Governance
1.1
1978
reform and opening-up
1986
Regulations on Functionality of State Owned Industrial Enterprises
1988
Law of Industrial Enterprises Owned by the Whole People
1992.5
The Standard Opinion on Joint-Stock Company
1993.4
Interim Provisions on the Management of the Issuing and Trading of Stocks
1993.11
Decision on Issues Regarding the Establishment of
a Socialist Market Economic System
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1.1 Institutional Evolution of China’s Corporate Governance
1.1
1993.12
Corporation Law
1994.8
Special Provisions of the State Council Concerning the Floatation
and Listing Abroad of Stocks by Limited Stock Companies
1999
Securities Law
2001
Code of Corporate Governance for Listed Companies
2005
Amendments of Corporation Law and Securities Law
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1.2 the development of private sector
1.2
Percentage of Private Sector Production in GDP
12.6%
15.3%
35.0%
44.6%
42.8%
49.7%
2000
Domestic Private Sector
2005
Foreign Investment Companies
Source: All-China Federation of Industry & Commerce (2006)
Public Sector
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1.2 the development of private sector
1.2
Percentage of Workers in Domestic Private Sector Production
300
35%
250
30%
25%
200
20%
150
15%
100
10%
50
5%
0
0%
1978 1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
number of workers in Domestic Private Sector (million)
percentage of workers in Domestic Private Sector in total workers
source: National Bureau of Statistics (2006)
Note: includes workers of all economic sectors and geographic areas.
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1.2 the development of private sector
1.2
Who controls the controlling shareholders of listed companies?
The controlling person
of the biggest shareholder
State Holding Companies
Number
Ratio (%)
901
72.14
13
1.04
313
25.06
Companies Controlled by Foreign Capital
6
0.48
NGO/QGO
4
0.32
12
0.96
1249
100
Collective Holding Companies
Private Holding Companies
Staff Members’ Association for Share-holding
Total
Source: Nankai University (2007)
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1.3 Performance of Corporate Governance
Performance of Corporate Governance: A Grading System
The controlling person of
the biggest shareholder
Mean
2004
2005
2006
State Sector
55.36
55.83
56.58
Private Sector
53.86
53.81
54.70
All Sectors
55.02
55.53
56.08
Source: Nankai University (2007)
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2
2: the road ahead
-- the larger issue: public governance
hardening budget constraint/ professional & mathematical management
-- to change ownership structure: the share diversification dilemma
insider control vs. the dominant biggest shareholder
-- to improve market system: referee or player
open & fair competition
-- to improve regulation: easy said then done
independent, transparent and fairness
mandatory disclosure
auditing
enforcement: systemic incentives
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Thank you!
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