A surprise sacking at China Merchants Bank frightens investors

CHINA MERCHANTS BANKICBCCCB has always stood out from the pack. It was founded by a former communist guerrilla in 1987 as China’s first commercial lender with a corporate-shareholding structure. It is part of a group with ties to a Qing dynasty project that sought in the 19th century to build an indigenous steam-powered shipping industry in order to compete with the West. The English name “merchants’‘ is a poor rendition of the Chinese, which is better translated as “investor recruitment”.The bank has been at the forefront of China’s economic transformation. The southern manufacturing hub of Shenzhen, where it is based, virtually sprang up around it from the late 1980s onwards. Its revolutionary founder, Yuan Geng, also launched some of China’s earliest economic reforms. It lent to private entrepreneurs, while clunky state banks preferred mainly to lend to other state entities. Although its shareholders are largely government-controlled, China Merchants Bank has operated more like a privately run group. This helped it attract better managers than the country’s four largest state lenders—Bank of China, Industrial and Commercial Bank of China (), China Construction Bank () and Agricultural Bank of China.