Thursday, January 06, 2005
The WSJ carried a very good story about Xie Ping, the head of the new Central Huijin Company, which is now the largest shareholder of BOC and CCB, both slated to go IPO this year. I do have to say that Wen made the right choice in picking Xie, even though the formation of Huijin is unlikely to turn BOC and CCB into completely commercialized banks. As long as they are majority state owned, Xie, along with the bank managers, will have to heed political signals emanating from Zhongnanhai. However, if anyone is going to closely watch bank performance and encourage commercialization, Xie is the person. As head of the PBOC research bureau then the PBOC financial risk department, Xie has seen every trick in the book in terms of bank branches and banks falsifying performance figures and hiding losses. Banks will have to answer to a tough customer in Xie. However, as the article points out, Xie's vigilance might turn into over-intervention from Huijin, which is an arm of the State Council.
Also, it will be interesting to see how Huijin works out its role vis-a-vis the CBRC, which is in charge of monitoring banks, and also the Central Organization Department, which is in charge of appointing top bankers. I am sure all kinds of bureaucratic conflicts will emerge. However, with Wen serving as Premier for the next 8 years, Xie will have a powerful patron in these fights. Furthermore, if Xie Ping does a good job sheparding the Big Four banks through the IPO process, Xie Ping will be poised to move further upstairs. After Wen's first term, Xie might be looking forward to an appointment as the head of the PBOC and eventually even to the pinnacles of power in Zhongnanhai. Much of it, however, will be determined by how smoothly the IPO process proceeds in the next few years. I suppose wish him the best, but I am not popping champagne just yet.
International
China's Banks Get Mr. Fix-It --- Premier Taps Outspoken Academic, Signals Intent to Shake Up Sector By Andrew Browne 1,281 words 5 January 2005The Wall Street JournalA8English(Copyright (c) 2005, Dow Jones & Company, Inc.)
Hong Kong -- IN A TWO-DECADE-long career at China's central bank, Xie Ping was notorious for speaking his mind at carefully scripted policy meetings. His knack for causing offense had been widely thought to have stunted his career.
But when Premier Wen Jiabao was casting around for an aggressive manager to look after the government's investments in two top commercial lenders, he picked the 49-year-old Mr. Xie for the post in November. The choice of the independent-minded Mr. Xie illustrates the central government's determination to shake up China's troubled banks -- but also the difficulties to come.
Mr. Xie doesn't have much time: In 2007, China's banking sector will be thrown open fully to foreign competition. Ahead of this enormous challenge for China's long-coddled state-run lenders, the government is doing what it can to strengthen their balance sheets.
A year ago, the government poured a total of $45 billion into Bank of China and China Construction Bank, the country's second- and third-largest banks, respectively, to help them wipe off bad loans and prepare to list their shares on the stock market. Mr. Xie runs Central Huijin Investment, the government investment vehicle set up to manage that enormous sum. Because Huijin owns virtually all the shares in both banks, a stake that still could be as high as 80% after the listings, Mr. Xie essentially calls the shots at both lenders -- an unprecedented position of authority. Huijin appoints five of the six seats on both banks' boards, with the power to weigh in on everything from staff-incentive plans to decisions on information-technology spending.
Turning around a decades-old culture of wasteful and politically driven bank lending is probably the most critical of all Beijing's overhauls. Because banks are the weakest link in China's fast-growing economy, success or failure could have broad repercussions now that China has become a key driver of global growth. China's biggest lenders are still burdened with mountains of bad debt -- estimates of nonperforming loans in the entire banking system go as high as $400 billion -- and an avalanche of lending in 2003 and early 2004 as parts of the economy overheated is sure to add substantially to the total.
Chinese state banks traditionally have measured success by the size of their loan books. Mr. Xie's task will be to force the two banks under his watch to gauge profits instead.
On a recent afternoon, Mr. Xie, who still dresses in the crumpled style of the academic he used to be, plants his feet on a coffee table in his old central-bank office, piled high with boxes in anticipation of his move. The table is cluttered with research papers, old newspapers and a large bottle of shampoo. The shampoo was recently handed out to all central-bank staff -- an outdated practice left over from the days when government employers acted as welfare agencies for their employees, supplying everything from soap to cinema tickets. Mr. Xie is out to change precisely that culture of entitlement.
His efforts hit home recently at the headquarters of Bank of China. All the office's employees received notice that they now must reapply for their jobs and justify their positions. Mr. Xie says he is looking overseas to recruit a chief credit controller and a risk-management officer.
"It's possible we could replace the manager of a bank if we don't like what he's doing," he says. That is a bold statement, given that the heads of Chinese banks are appointed by the organization department of China's Communist Party.
The need to instill discipline is crucial. During the past several years, Beijing has put together huge bailout packages for the four biggest banks -- Industrial & Commercial Bank of China and Agricultural Bank of China are the largest and fourth-largest, respectively -- only to watch bad loans continue to pile up. "It's not a matter of capital: They have enough already," Mr. Xie says. "Now they need market discipline."
Mr. Xie promises to manage with a light touch. "I represent the shareholders," he says. "I help to choose the board members. After that I won't interfere in day-to-day management."
Those who know him, however, are skeptical of such claims. "He won't be at all shy about telling a bank manager: `This is your performance, this is your compensation package,'" says one of Mr. Xie's close associates. The fact that Huijin reports to the State Council, or the cabinet, suggests the government has more confidence in Mr. Xie than in the banks' own managers.
Mr. Xie's efforts likely will put him at odds with powerful ministries and provincial officials who long have treated banks as funding arms for the government. But he has proved he isn't intimidated by power. A native of Wenzhou, a coastal city famous for its entrepreneurial traditions, Mr. Xie spent his early years as a shipyard worker studying English in his spare time. He joined the central bank in 1985 and rose through the ranks, most recently heading the financial-stability department in charge of cleaning up commercial lenders.
He had open disagreements with his former boss, Dai Xianglong, then the governor of the People's Bank of China -- rare in the formal and deferential culture of Chinese government. According to bank insiders, Mr. Dai favored working through existing bureaucracies to overhaul China's banks. Mr. Xie argued for dismantling bureaucracies, bringing in outside shareholders and foreign investors to the banks and creating independent boards to impose real supervision.
Mr. Xie is unusually qualified to exert his will in this new job. He is said to have the ear of Premier Wen, who includes him in a close circle of advisers. He is one of China's most able intellects, a prolific author who has twice won China's top economic-research prize.
Mr. Xie's position as an outsider in the elite world of Chinese politics also could be a factor in his willingness to speak out and challenge higher-ups. Wenzhou's entrepreneurial energy is looked upon by elites with a mixture of admiration and disdain, and natives of the city are rare in academia and government.
But these very characteristics could also alienate others. In central-bank meetings, those who have watched him over the years say Mr. Xie often cuts down his colleagues to their face. "It's not personal," explains one longtime associate. "He just makes logical arguments."
---
Cui Rong in Beijing contributed to this article.
---
Up to the Job
Xie Ping has been tapped to fix up China's troubled big banks before 2007.
A look at how he arrived there:
-- 1955: Born in the port city of Wenzhou in Zhejiang Province.
-- 1977-82: Worker and propaganda staffer at Wenzhou Shipyard.
-- 1982-85: Studied at Xinan University of Finance and Economics in
Chengdu; awarded a master s degree in economics; was on staff at PBOC's
Investigation and Research Dept.
-- 1985-88: Studied at People's University in Beijing; awarded a doctorate
in economics.
-- 1988-2004: Joined PBOC, rose from staffer in General Planning and
Currency Circulation departments to head of Deposit Planning and Policy and
Research sections; deputy director of Policy and Research and Nonbank
Financial Institute departments, becoming director of the latter; governor of
PBOC's Hunan branch; and director of PBOC's Financial Stability Dept.
-- 2004: Named general manager of Central Huijin Investment in November.
Also, it will be interesting to see how Huijin works out its role vis-a-vis the CBRC, which is in charge of monitoring banks, and also the Central Organization Department, which is in charge of appointing top bankers. I am sure all kinds of bureaucratic conflicts will emerge. However, with Wen serving as Premier for the next 8 years, Xie will have a powerful patron in these fights. Furthermore, if Xie Ping does a good job sheparding the Big Four banks through the IPO process, Xie Ping will be poised to move further upstairs. After Wen's first term, Xie might be looking forward to an appointment as the head of the PBOC and eventually even to the pinnacles of power in Zhongnanhai. Much of it, however, will be determined by how smoothly the IPO process proceeds in the next few years. I suppose wish him the best, but I am not popping champagne just yet.
International
China's Banks Get Mr. Fix-It --- Premier Taps Outspoken Academic, Signals Intent to Shake Up Sector By Andrew Browne 1,281 words 5 January 2005The Wall Street JournalA8English(Copyright (c) 2005, Dow Jones & Company, Inc.)
Hong Kong -- IN A TWO-DECADE-long career at China's central bank, Xie Ping was notorious for speaking his mind at carefully scripted policy meetings. His knack for causing offense had been widely thought to have stunted his career.
But when Premier Wen Jiabao was casting around for an aggressive manager to look after the government's investments in two top commercial lenders, he picked the 49-year-old Mr. Xie for the post in November. The choice of the independent-minded Mr. Xie illustrates the central government's determination to shake up China's troubled banks -- but also the difficulties to come.
Mr. Xie doesn't have much time: In 2007, China's banking sector will be thrown open fully to foreign competition. Ahead of this enormous challenge for China's long-coddled state-run lenders, the government is doing what it can to strengthen their balance sheets.
A year ago, the government poured a total of $45 billion into Bank of China and China Construction Bank, the country's second- and third-largest banks, respectively, to help them wipe off bad loans and prepare to list their shares on the stock market. Mr. Xie runs Central Huijin Investment, the government investment vehicle set up to manage that enormous sum. Because Huijin owns virtually all the shares in both banks, a stake that still could be as high as 80% after the listings, Mr. Xie essentially calls the shots at both lenders -- an unprecedented position of authority. Huijin appoints five of the six seats on both banks' boards, with the power to weigh in on everything from staff-incentive plans to decisions on information-technology spending.
Turning around a decades-old culture of wasteful and politically driven bank lending is probably the most critical of all Beijing's overhauls. Because banks are the weakest link in China's fast-growing economy, success or failure could have broad repercussions now that China has become a key driver of global growth. China's biggest lenders are still burdened with mountains of bad debt -- estimates of nonperforming loans in the entire banking system go as high as $400 billion -- and an avalanche of lending in 2003 and early 2004 as parts of the economy overheated is sure to add substantially to the total.
Chinese state banks traditionally have measured success by the size of their loan books. Mr. Xie's task will be to force the two banks under his watch to gauge profits instead.
On a recent afternoon, Mr. Xie, who still dresses in the crumpled style of the academic he used to be, plants his feet on a coffee table in his old central-bank office, piled high with boxes in anticipation of his move. The table is cluttered with research papers, old newspapers and a large bottle of shampoo. The shampoo was recently handed out to all central-bank staff -- an outdated practice left over from the days when government employers acted as welfare agencies for their employees, supplying everything from soap to cinema tickets. Mr. Xie is out to change precisely that culture of entitlement.
His efforts hit home recently at the headquarters of Bank of China. All the office's employees received notice that they now must reapply for their jobs and justify their positions. Mr. Xie says he is looking overseas to recruit a chief credit controller and a risk-management officer.
"It's possible we could replace the manager of a bank if we don't like what he's doing," he says. That is a bold statement, given that the heads of Chinese banks are appointed by the organization department of China's Communist Party.
The need to instill discipline is crucial. During the past several years, Beijing has put together huge bailout packages for the four biggest banks -- Industrial & Commercial Bank of China and Agricultural Bank of China are the largest and fourth-largest, respectively -- only to watch bad loans continue to pile up. "It's not a matter of capital: They have enough already," Mr. Xie says. "Now they need market discipline."
Mr. Xie promises to manage with a light touch. "I represent the shareholders," he says. "I help to choose the board members. After that I won't interfere in day-to-day management."
Those who know him, however, are skeptical of such claims. "He won't be at all shy about telling a bank manager: `This is your performance, this is your compensation package,'" says one of Mr. Xie's close associates. The fact that Huijin reports to the State Council, or the cabinet, suggests the government has more confidence in Mr. Xie than in the banks' own managers.
Mr. Xie's efforts likely will put him at odds with powerful ministries and provincial officials who long have treated banks as funding arms for the government. But he has proved he isn't intimidated by power. A native of Wenzhou, a coastal city famous for its entrepreneurial traditions, Mr. Xie spent his early years as a shipyard worker studying English in his spare time. He joined the central bank in 1985 and rose through the ranks, most recently heading the financial-stability department in charge of cleaning up commercial lenders.
He had open disagreements with his former boss, Dai Xianglong, then the governor of the People's Bank of China -- rare in the formal and deferential culture of Chinese government. According to bank insiders, Mr. Dai favored working through existing bureaucracies to overhaul China's banks. Mr. Xie argued for dismantling bureaucracies, bringing in outside shareholders and foreign investors to the banks and creating independent boards to impose real supervision.
Mr. Xie is unusually qualified to exert his will in this new job. He is said to have the ear of Premier Wen, who includes him in a close circle of advisers. He is one of China's most able intellects, a prolific author who has twice won China's top economic-research prize.
Mr. Xie's position as an outsider in the elite world of Chinese politics also could be a factor in his willingness to speak out and challenge higher-ups. Wenzhou's entrepreneurial energy is looked upon by elites with a mixture of admiration and disdain, and natives of the city are rare in academia and government.
But these very characteristics could also alienate others. In central-bank meetings, those who have watched him over the years say Mr. Xie often cuts down his colleagues to their face. "It's not personal," explains one longtime associate. "He just makes logical arguments."
---
Cui Rong in Beijing contributed to this article.
---
Up to the Job
Xie Ping has been tapped to fix up China's troubled big banks before 2007.
A look at how he arrived there:
-- 1955: Born in the port city of Wenzhou in Zhejiang Province.
-- 1977-82: Worker and propaganda staffer at Wenzhou Shipyard.
-- 1982-85: Studied at Xinan University of Finance and Economics in
Chengdu; awarded a master s degree in economics; was on staff at PBOC's
Investigation and Research Dept.
-- 1985-88: Studied at People's University in Beijing; awarded a doctorate
in economics.
-- 1988-2004: Joined PBOC, rose from staffer in General Planning and
Currency Circulation departments to head of Deposit Planning and Policy and
Research sections; deputy director of Policy and Research and Nonbank
Financial Institute departments, becoming director of the latter; governor of
PBOC's Hunan branch; and director of PBOC's Financial Stability Dept.
-- 2004: Named general manager of Central Huijin Investment in November.
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