ZTE Corporation, one of the nation's leading telecom equipment makers, has been crowned the best corporate governance performer last year among China's top 100 listed companies, according to a corporate governance rating report released yesterday.

 

The corporate governance assessment report rated the corporate governance performance of FORTUNE China China's designated top 100 listed companies valued by their revenue.

 

China Merchants Bank, a Shenzhen-based commercial bank, was ranked second in the report, which was jointly conducted by the Chinese Center for Corporate Governance at the Chinese Academy of Social Science (CASS) and City University of Hong Kong's Faculty of Business.

 

Another Shanghai-floated bank, Hua Xia Bank Co Ltd was ranked third.

 

The report, sponsored by global risk consulting firm Protiviti, said compared to last year, the overall corporate governance standard of the top 100 Chinese listed companies has improved, but only by a small margin.

 

The rise in the corporate governance standard, the assessment report says, is largely "thanks to the improvements made in areas such as better compliance with increased requirements on information disclosure and transparency."

 

Indicators such as information disclosure and transparency, shareholders' rights and the equal treatment of shareholders are used to assess and then evaluate the corporate governance performance.

 

China's top 100 public companies are doing the best in areas such as information disclosure and transparency, the report found.

 

"This is mainly due to the strict disclosure requirement set by regulators," explained Professor Lu Tong, author of the report.

 

"The problem is that many Chinese listed companies are still not used to actively communicating with shareholders and the public," said Lu, also the director of the Chinese Center for Corporate Governance at CASS.

 

Chinese public firms, however, performed poorly in fields such as shareholders' rights and responsibilities of board directors, two areas that are considered vital for sound corporate governance, the rating report noted.

 

"In those areas, even China's top 100 listed companies have a long way to go," said Lu.

 

"It is in those two areas that Chinese listed firms should do the most in order to refine their corporate governance," the professor said.

 

"Compared with pressure from the regulators, the capital market force is still weak in terms of pushing listed companies to improve their corporate governance behavior," said Zhou Shaopeng, a corporate governance expert at China National School of Administration.

 

It is the second annual corporate governance rating report to be released. Sinochem International Corporation, a Shanghai-based chemical company, was the winner of last year's rating and ranked sixth this year.

 

The ongoing share merger reform began last year to convert the listed companies' non-tradable shares into tradable shares, the report says the reform "has laid a solid foundation for public companies to further improve their corporate governance."

 

"However, to have in place a sound corporate governance will be an arduous task," the report warned.

 

(China Daily April 20, 2006)