This paper argues that the deeply rooted cause of poor corporate governance practices in China's state-owned banks is the discretion enjoyed by policy makers to re-optimise their policy choices when they deem necessary and the consequent moral hazard leading to opportunistic behaviours of bank managers. By examining the case of Bank of China Hong Kong (BoCHK), the paper suggests that international listing can provide an effective mechanism to mitigate the consequence of discretionary policies and managerial opportunism at home because the company is now disciplined and regulated by a more developed capital market outside the home jurisdiction. It shows that BoCHK's IPO preparation and first two years of listing on Hong Kong Stock Exchange (HKSE) have induced in-depth corporate restructuring and noticeable improvement in governance practices. Copyright Blackwell Publishing Ltd 2005.

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This study re‐examines the construct of financial inclusion, through a literature review and confirmatory factor analysis (CFA). First, we conduct a systematic review of definitions, measures and data sources. Second, we apply CFA to test two prominent financial inclusion indices. The CFA analysis reveals a high correlation between the ‘access’ and ‘use’ dimensions; hence, indices fail to capture the multidimensionality of financial inclusion. Existing indices tend to be biased towards measuring the supply‐side and quantitative aspects of financial inclusion. The extent to which lower income individuals and smaller firms have been incorporated into the formal financial sector is not captured.

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for their assistance with various aspects of the research fieldwork. We are especially grateful to the Guest Editors (Linda Yueh and Yang Yao) and two anonymous referees of this special issue for detailed and very constructive comments and suggestions. This paper proposes a micro-level framework to account for how firms in developing economies overcome domestic institutional constraints. It illustrates that the mechanisms enabling those firms to benefit from financial globalization are more complex than the "direct" financial channels outlined in the neo-classical approach. China provides an important example in this context, as its capital market liberalization has been limited and neither the legal nor financial system is well developed. Yet microlevel evidence from China's internationally listed enterprises indicates that innovative firms can overcome institutional thresholds, secure access to international capital, and benefit and learn from international capital markets. This can in turn induce market-level improvements through regulatory competition and demands for a more standardized system of economic regulation.

Resource-based theories of the firm argue that the success of one firm over another is largely due to its resource endowments. Large enterprises have long been recognised as leading sources of learning innovation and growth. This is not just restricted to large firms in developed economies, but also applies to firms in developing economies like China, where large firms have long and complex histories in the state bureaucracy. Focusing on the case of China's petrochemical sector, this paper argues that even is a sector with a long history in central planning, the critical resources of a firm matter. It shows how existing organisational resources inherited from the pre-reform era, when provided with the correct incentive structures, can survive economic transition and be successfully applied under market conditions. In the petrochemical sector a key inducement was the commitment of the state to expose the sector to international developments where possible. The paper describes how this commitment has resulted in a mostly positive adjustment, but has also created ambiguities over how resources should be developed in future in a rapidly changing global industry.

While it is commonly assumed that there are no known precedents against which to benchmark the internationalisation of the Renminbi (RMB), this paper argues that the PRCs own development provides a useful perspective on the internationalisation debate.Specifically it indicates that lessons can be learnt from the successes and the shortcomings of efforts to internationalise the RMB in the 1970s. During this period Chinese state-owned banks in Hong Kong played a central role in mobilising finance for foreign trade. Access to Hong Kong's developed financial institutions allowed the PRC to maximise its receipts from foreign trade, promote the RMB as a stable currency that was likely to appreciate as well as minimise the risks of undue swings in capital flows. The paper shows that although China no longer faces foreign exchange scarcity, economic reforms have not yet resolved vulnerabilities in China's financial institutions. Unlike the 1970s China is no longer immune from market risk that might accompany a reduction in foreign residents RMB holdings. As such Hong Kong's banking system has retained its unique role as the location of choice for mitigating the risk of undue capital swings.