rests with handling well the relationship between the principle of the party ’ s supervision over cadres and respecting the rights of investors. the party ’ s supervision over cadres is one of the basic principles of the communist party of china ( cpc ). the core of the principle is to safeguard implementation of the party ’ s general and specific policies through organizational construction. as the ruling party, cpc can recommend party members and non - party people with both ability and integrity for holding positions in leading groups at various levels by directly relying on leadership and cohesion of the party organization. our party has been making efforts in strengthening inner - party democratic construction and we shall have the party committees play bigger role in choice and hiring of competent personnel in a bid to eradicate corruption in hiring of personnel due to minority decisions. in such public opinion organizations as the npc and the cppcc and their local subordinates, and in enterprises and social organizations, there is an issue of the relationship between the ruling party and interest parties in the above entities. in the new era, the organization and personnel system is confronted with a new issue of how the competent personnel from viewpoint of the party organization receive public acceptance and legally hold the proper positions. the relationship between shareholders and top management is a principal - agent relationship. if we ’ d like to choose the board of directors and the chairman thereof and to let the board to have its say in establishing favorable incentive and restraint mechanism for top management, then we shall grant to investors the right of personnel choice and hiring. as such, the agent will serve the owner in a loyal manner, so as to eradicate intrusion through insider control into the interest of shareholders. china ’ s financial enterprises, in particular, the state - owned commercial banks, have continued to use the administrative system for the party organizations and government agencies as their personnel system. there is a strong sense of officialdom and yet to form the ideology of restraint of ownership. when commercial banks are still wholly state - owned or state - controlled, there is still no intense contradiction. while the equity is diversified, there could be conflicts between the power by the shareholders in choice of agents and the existing personnel system. therefore, the key to improving corporate governance in financial enterprises lies in dealing well with the relationship between the principle of the party ’ s supervision over cadres and the power of shareholders. 2. “ recommendation by the party organization and acceptance by the public ” shall be concrete reflection of the principle of party ’ s supervision over cadres

, shareholders may ask the supervisory committee or supervisors to lodge proceedings. in case of emergency, shareholders may lodge proceedings on their own behalf. ( iv ) we shall set up limited government, safeguard ownership in real earnest, create level playing ground and cultivate the sense of serving the public by financial enterprises. a real market economy shall be one based on ruling by law. the concept of limited government is the cream of the principle of ruling by law. financial enterprises shall be regulated due to its special nature of public products, externality and information asymmetry. the regulation, however, shall be moderate. regulation shall focus on compliance and internal risk controls. the financial industry is an industry that manages risks. all financial products have inherent risks. the issue herein lies in acknowledgement of risks, presentation of risks to clients, measures to mitigate and control risks to the extent capital and reserves of financial enterprises could sustain. regulation shall be confined to the extent creativity of financial enterprises will not be stifled and risks shall be fully disclosed to clients. reliance solely on regulation will be costly and ineffective. in terms of the financial safety net, the first priority is self - restraint of financial institutions. industrial self - discipline and public oversight ensue with it, while financial regulation comes the fourth. we shall protect ownership of financial enterprises in real earnest. we shall emphasize prior claim of banks for their creditor ’ s rights with collateral, and shall establish gradually the basic credit database fully covering enterprises and individuals, in a bid to improve the social credit environment and to create favorable environment for banks ’ operation. financial institutions are inflicted with costs in providing services to the public and shall be paid off to be viable enterprises. many clients, who used to enjoy free services for some financial products for a long period, are still not used to the practice. financial enterprises shall make efforts for explanation and publicity when charging the relevant fees. meanwhile, financial enterprises shall in turn sharpen their sense of social responsibility and shall cherish a sense of accountability to repay the public by providing prime and prompt financial services for residents in their community and other enterprises as well. as such, banks may charge fees for their services while clients feel the services are worthwhile of the charges. the board and top management of financial enterprises shall take serving the public as the sole purpose of development of their enterprises, and earn their room for viability and growth in serving the public.