Guo Shuqing, the newly appointed Chairman of the China Construction Bank(the third-largest lender by assets in China), may never think of his new postition when he attended the opening of the bank's shareholding company as top government official last September. At that time, he was the Vice Chairman of the Central Bank, and the Chairman of Central Huijin Investment, the state-owned company to hold state capital investments in banks.
Six months later, he was appointed as the Chairman of CCB, after Zhang Enzhao, the former Chairman, was removed for the bribe scandal. Now Guo faced sticky situation to push the bank's privatization amid the recent bribe scandal and the pressure on how to use the government money in an efficient way. The goverment injected US$ 22.5 billion each into CCB and rival Bank of China (BOC) late year, to help two banks speeding up their privatization and getting rid of bad loans.
Academics said the injection had violated the regulation. There was no specific laws about how to use the foreign reserve to help the state-owned company get out of losses, so how the Central Bank could transfer the money without grant of laws? Wu Jinglian, an economist who are famous for challenging the government, said that the government should explain the law or set new one before transfering any money to the commercial banks.
Guo of the CCB was attending the same conference two weeks before his appointment, when Wu gave the argument. Guo said the foreign reserve could be both used to balance the international currency sheet and maintain the stability of the financial system under the regulation. The injection belonged to the second type, while requesting the law's admission will affect the progress of the financial reform, Guo added.
Now the problem with Guo is not only whether it is legal to inject money to the commercial bank, but how to reform the bank in a efficient and decent way. It would be hard for a regulator to change his style to a businessmen, but he should change as soon as he could. The time is urgent before financial industry opening at the end of next year.