ABSTRACT
Political governance and corporate governance share common imperatives such as constitution, contract, representativeness, accountability and participation. At the firm level, as an institutional alternative to massive privatisation and substantial democratisation, the transformation of state-owned commercial banks corporate governance clearly demonstrates a pattern of institutional innovation facilitated by instrumental adaptability and justified by instrumental rationality. Corporate governance based on commonly accepted standards has been viewed as a means of attracting foreign capital. In a transitional economy like China, the supporting institutions essential for sound corporate governance are generally missing or underdeveloped, while the impact of financial market competition on corporate governance is limited. China's state sector has assumed the guise of Western corporations, which camouflages its true nature of a patronage system centred on the Party's nomenklatura. The nature of corporate governance depends on the nature of the firm, while the nature of the firm is determined by the nature of the state.
