Enforcement of Corporate Governance in Asia. the Unfinished Agenda
Reform has also led to a shift in the relative importance of the state versus the non-state sector, with the non-state sector contributing an increasing share to the national economy. But there are a number of key unfinished tasks in reforming both the state and the non-state sectors of the Chinese economy. Existing Chinese institutions, despite progress in the past, are still not entirely compatible with a well-functioning market economy.
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Vested interests, informational asymmetry, abuse of power , and disrespect for laws and regulations are still endemic in the Chinese market and have serious effects on the way the market works as well as government decision-making and expenditure. It will require a great deal of courage and wisdom to push the political reforms that are needed to address these problems, although they are now essential to entrenching a modern and sustainable enterprise system in China. If China wants to take economic development to its next stage, it will have to nurture the market-based economy and establish a more robust and adaptable regulatory framework, providing fair access for both SOEs and private companies to capital and technology and creating a social culture that builds entrepreneurial capabilities and extends respect to the contribution that entrepreneurship makes.
The economic gains from the reorganisation of SOEs would be larger if policies were directed at more rapid and broader withdrawal of SOE monopolies from competitive industries including in the services sectors and wider and deeper participation of private capital in the restructuring of the SOE sector.
In and , the State Council formulated policies to encourage the non-state economy and private investment flows into monopolised industries. In reality, there are still many barriers that prevent private investment from penetrating state-monopolised industries in China.
Private businesses need the freedom, and access to finance, that would allow them to invest in high-end areas, such as finance and telecommunication. Corporate governance remains weak in China.
There is weak external discipline on corporations; state shareholder and regulatory functions have in practice yet to be sufficiently separated; and institutional and regulatory weaknesses prevent effective enforcement of the rights and obligations that are normal under modern corporate governance mechanisms. Endorse bill to improve accounting and auditing. Next step to expand coverage.
Consolidation through mergers, closures Recapitalization, including through public funds Profitability improved; supervision strengthened Attention now on nonbank restructuring. ITC problems 3 times in last 4 years. Credit card delinquency problems. Illiquid market for low-rated corporate bonds.
Strengthen supervision, particularly on MMF. Restore credit card companies to financial health. Weak CCCs should raise capital or seek out new buyers. Improve risk management and information. Improve efficiency of bond market. Perceptions of implicit guarantees are costly.
Improve accuracy of bond ratings. Overdue receivables II. Rescheduled loans excluding overdue III.
Source: Korean authorities and staff estimates. Enforce FLC and provisioning standards. Bad Bank: Difficulty in facing multiple objectives Sharpen commercial orientation and announce clear mandate to maximize recovery. Serve as a market catalyst. For insolvent borrowers: personal bankruptcy. Need to establish legal and regulatory framework that balances competition and privacy needs. Require information sharing with credit bureaus, or set up centralized agency to collect and distribute data. Allow credit bureaus to compete on price, service, and quality.
Extend payment history up to 7 years. Competitive System of Credit Information Bureaus. Economic structure evolving to one based on developing and manufacturing advanced products. Firms need to be able to shift their output as demand and technology changes. Significant expansion of service sector requires flexible labor force and working conditions.
Help Korea to achieve its goal of becoming a business hub in Northeast Asia. Core of regular workers with high degree of protection.
Download Enforcement Of Corporate Governance In Asia. The Unfinished Agenda
Temporary workers whose numbers can adjust in line with economic conditions. Results: Firms have shifted to hiring temporary workers. Increase in job insecurity. Confrontational industrial relations. Hampers investment, especially FDI. Difficulty of dismissal reduced. Replace criminal punishment for unfair dismissal with monetary compensation.
Strengthen social safety net. Only one-fifth of unemployed receive benefits.
Unfinished reform threatens Chinese growth | East Asia Forum
Support plans to expand employment and industrial accident compensation insurance system. Corporate governance, financial restructuring, labor reform. Also to produce domestic sources of growth to complement strong exports. Banking sector Reforms. Since , the Indian financial system has undergone radical transformation.