In response to the Chinese government's recent authorization of a joint-stock reform plan for the Industrial and Commercial Bank of China (ICBC), Yang Kaisheng, vice governor of China's biggest bank said at an ongoing forum that the joint-stock reform is a reform "we cannot afford failure on."

A total of 15 billion US dollars of the country's foreign exchange has been allocated to the ICBC for its reform. Given the bank's huge size and its bad loan ratio of nearly 20 percent, the amount of capital injection into the ICBC is phenomenal.

"As long as we firmly grasp the historical opportunity of joint-stock reform, and build up a perfect governance structure and policy management system, we can prove that China can also establish the modern commercial banks with good service and profit," Yang said at the high-level forum on financial reform which was held here from Monday to Wednesday.

At the end of 2003 China initiated an ambitious reform on the financial system when the central government injected a combined 45 billion US dollars into the Bank of China (BOC) and China Construction Bank (CCB) to help boost their share-holding reform plan.

"This is a last-ditch battle. We cannot afford any failure. We must take decisive measures to ensure successful reforms," said Premier Wen Jiabao commenting on fund injection to the BOC and CCB.

The performance of the BOC and CCB, however, has not been quite satisfactory. Frequent crimes occurred one after another, shocking the public with huge amounts of money involved. CCB Board Chairman Zhang Enzhao's resignation this year has aroused attention from home and abroad.

The ICBC, with a higher bad loan ratio and larger size, was expected to receive more money than the BOC and CCB, each of which got 22.5 billion US dollars. In fact the ICBC only received 15 billion, much less than expected.

The ICBC is drawing lessons from the BOC and CCB. "The ICBC should build a long-term risk control system and transform the operational mechanism," Yang said. "Bank scandals will severely damage bank images in such a society with increasing transparency."

The government is still calling on the BOC and CCB to continue improving their managerial structure and risk-control and internalcontrol mechanisms as well as punishing those responsible for non-performing loans. It claims, though, that the bank, having made remarkable progress in internal control, managerial work and profit improvement, is "basically ready" for the joint-stock reform.

Standard & Poor's Ratings Service said Friday that the recent 15 billion US dollars capital injection into the ICBC represents a further positive step by the Chinese government to resolve the legacy problems of the country's banking system.

The rating service said the injection is likely to form part of a sizable recapitalization package for the ICBC, which needs to address its inadequate capitalization and a large shortfall in itsloan loss provisions.

Source: Xinhua