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Tuesday, 15 January, 2002, 11:56 GMT
China banking chief under investigation
CCB internet homepage
China's banking system has been bedevilled by reports of false accounting
The BBC's Duncan Hewitt reports from Shanghai

China has given the first details of the reasons for the removal of the president of one of the country's largest commercial banks last week.

China's central bank chief told a news conference that Wang Xuebing, president of the China Construction Bank, was being investigated in connection with credit problems at bank branches under his control.

Mr Wang was seen as a prominent advocate of financial reform - there has been some speculation that his sacking could be linked to power struggles in the Chinese leadership.

The news of Wang Xuebing's sacking has shocked China's financial community.

The 49 year old fluent English speaker was a former president of the Bank of China, widely seen as one of the faces of financial reform in the country.

Bank of China Governor Dai Xianglong listens to a question during a press conference
Bank of China Governor Dai Xianglong details investigation

Two years ago he was transferred to the presidency of the Construction Bank, another of China's big four state banks.

He also headed an investment bank in partnership with the US bank Morgan Stanley.

But China's central bank governor, Dai Xianglong, confirmed that Mr Wang is now under investigation for what he called negligence of duty, and in some cases direct responsibility for credit problems at branches of the Bank of China.

International probe

He said these included some overseas - Mr Wang was a former head of the US arm of the Bank of China, and unconfirmed US media reports have suggested that the US Treasury is also making investigations.

It is not clear exactly what kind of credit problems Mr Wang is being investigated for.

China's banking system has been bedevilled by reports of false accounting and bad loans, which make up at least a fifth of its total loans.

Yet Mr Wang had up to now been credited with helping the Bank of China to tackle such problems during his time there.

There has been speculation - though so far no evidence - that his removal could be linked to power struggles in the run up to the appointment of China's new political leadership over the next year.

Like another former senior banker, Zhu Xiaohua, who was placed under investigation two years ago, Mr Wang is seen as close to China's prime minister Zhu Rongji.

Yet foreign analysts say there is little doubt that there are still deep problems in China's banking system - which is trying to gear itself for the effects of foreign competition under World Trade Organisation rules which take effect within five years.

Latest figures from big state banks show the scale of the problem - bad loans and other problems meant the giant Industrial and Commercial Bank of China made profits last year of just over $700m - low by international standards.

The BBC's Duncan Hewitt
"This scandal has shocked the country's banking sector"
See also:

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