IIF study shows China still lags in corp governance

Zurich, March 30 | Updated: Mar 31 2006, 05:30am hrs
China has made progress in introducing reforms in its banking sector and equity markets, but still lags many emerging market countries in corporate governance, a new study showed on Thursday.

The study by lobby group the Institute of International Finance found that in the last two years Chinas authorities have recognised that investor confidence is tied to high standards of corporate governance and that this is a prerequisite for developing capital markets.

Josef Ackermann, Deutsche Bank head, who chairs the IIFs board, said, The challenge now is to build on these measures to extend better governance throughout the corporate sector.

Victor Chu, chairman of First Eastern Investment Group, who led the China corporate governance task force, said the study had showed that financial disclosure and the overall corporate governance culture remained weak.

The task force is making a number of recommendations, one of which is to resume new equity issues in the domestic stock markets and to allow market forces to function normally.