A number of Hong Kong newspapers reported in late September that Liu Mingkang, the head of the China Banking Regulatory Commission, China's bank regulator, would soon be reassigned to become governor of Fujian province. If true, it would be a bad sign for China's banking reforms, perhaps the most crucial task facing the central leadership.
It is always a mistake to think that reform can depend on a single man (look at how Zhu Rongji's supporters used to give him singular credit for everything that went right in China in the '90s) but Liu is nonetheless a great asset for his country.
He is smart, well-versed in the problems of China's banks and almost dementedly fearless in his adherence to the standards needed to turn the country's big, sick state-owned financial institutions around.
If anyone with a less firm hand took over, all those foreigners lining up to buy into the planned IPOs for the big banks should think again.
But amidst the speculation about Liu's fate – the reports remained unconfirmed – Fat Dragon believes there is an even more important issue in play here, and that is the way that such appointments are made. Before he took over as the banking regulator, Liu was at the central bank and the Bank of China. He was also the deputy governor of Fujian province – hence the chance that he could return there.
Such a CV is a reminder that Liu, whatever his stellar qualities, remains above all a functionary, to be assigned to whatever job the Communist Party's personnel department decides he should take on.
It is small wonder, then, that the Bank of China, and countless other large state-owned enterprises, cannot carve out an independent position and identity for themselves, because they will always be headed by a government official.
No matter how business savvy such top officials may be, they are always going to be constrained by the larger aims of the state, and their own personal ambitions to survive and prosper in the system. The institutions themselves take a back seat to such considerations.
This affects SOEs that are listed overseas as well. Take the overseas-listed CNOOC, China's third largest oil company, which is mainly responsible for offshore oil exploration and natural gas. Their previous head, Wei Liucheng, was appointed governor of Hainan province last year.
Despite the potential impact of such a sensitive change on the company's share price overseas, the market was not informed of Mr. Wei's new job until some days after he was internally replaced.
For all their talk of being independent profit-driven businesses, this speaks volumes about the real priorities that the state sets for such companies and their leadership. They are servants of the state first and foremost, and business leaders a distant second.
To be sure, to be successful officials, they may have to be competent business leaders as well. But profit is not their priority. It is strengthening the state's assets, over which they have temporary custodianship.
Sure there are good CEOs and bad CEOs in Western economies. But in China, there are only good and bad officials. The two should not be confused, at least until Chinese enterprises are allowed, or forced, to stand on their own two feet and appoint their own leaders. Only then, will they be able to take true responsibility for their decisions.