Country Analyses, Second Edition
Edited by Christine A. Mallin
10 China’s corporate governance development On Kit Tam and Celina Ping Yu INTRODUCTION Corporate governance development in China is entering a new phase where effective corporate governance mechanisms and practices have become a necessary condition for the country’s quest to achieve enduring prosperity through an open market economy that can compete globally. Whereas Chinese corporate governance might have been considered as an esoteric topic purely for the regulators and academics over a decade ago, it is now very much part of the business language for the diverse group of corporate stakeholders including investors, managers, company directors, as well as government and non-government organizations. For China to sustain its remarkable economic growth momentum, developing creditable and effective corporate governance in China’s increasingly diverse forms of business organizations that must compete or operate globally can no longer be an afterthought. As argued earlier by Tam (1999), for China’s adapted version of the AngloAmerican model of corporate governance to work effectively, the accompanying formal and informal market and social institutions would need to be developed and functioning effectively. While an impressive range of modern corporate governance mechanisms and practices have continued to be adapted and introduced in China, there are some inherent systemic issues affecting the emergence of a fully effective system of corporate governance in the country. These issues include, for example, the now familiar problems of the governance consequences from the dominance of state ownership in listed companies, major banks and unlisted enterprises; insider control; poor disclosure and monitoring; the exercise...
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