Central Huijin Investment Ltd (Huijin), an investment unit of China's sovereign wealth fund, has been increasing its share holdings in China's four largest commercial lenders over the last year in a bid to shore up investor confidence in these institutions.
Equity investors have been turning their backs on the country's commercial banks because of concerns about the efficiency of their management practices and their risk management abilities. Huijin's investment moves will do little to allay these concerns or provide banks with strong incentives to shape up their operations.
What investors really care about right now is whether banks can survive as their non-performing loans swell, and whether they can continue to increase their profits as the country gradually liberalizes interest rates.
Rather than just handing them money, Huijin should help these banks choose qualified independent directors with the knowledge and experience to strengthen their businesses.
The author is Xiong Jinqiu, a commentator.