BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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Rethinking financial role of Central Huijin
(China Daily)
Updated: 2007-01-26 10:05 Created in 1974, Temasek Holdings is an investment company fully controlled by the Singapore government. Holding nearly all of the country's biggest companies, from transportation, telecommunication, banking to tourism, the investment company makes considerable profits every year. Governor Zhou Xiaochuan made a point in his remarks about restructuring Central Huijin. If restructured as a holding company of financial assets, it could operate according to the law of themarket economy, make decisions more flexibly and have less limits on its commercial activities in the capital market. Yet a new position for Central Huijin must be legally defined, no matter what its future direction. The authorities should define by law the company's function, targets, structure, business mode, appraisal of achievement and supervision. The law should also spell out Central Huijin's relations with all relevant departments. Because of the absence of such law, Central Huijin is not legally authorized though it does operate with the consent of the government. Without an explicitly defined position, Central Huijin cannot clarify its relations with the State or the central bank as an agent managing State financial assets. Admittedly, the business mode of Temasek Holdings has precious value as a reference for addressing the problems encountered by Central Huijin. Yet, it would be vital for us to understand the essence of this model before we make substantial moves in its direction. Established to meet market requirements, Temasek Holdings does not enjoy any favorable policy from the government, nor is it subject to any government intervention in its investment decisions. Judging from the current business of Central Huijin, major changes need to be made before it can follow in the path of Temasek Holdings. With full administrative penetration, Central Huijin should attribute most of its profits to government policies. Without the support of the government, it is almost impossible for Central Huijin to achieve commercial revenues on its own. As the biggest shareholder of the three listed Big Four commercial banks, Central Huijin benefits from government policies. The three banks would have been unlikely to go public so quickly and be so profitable without government support. The author is a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences
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