I THINK SOMEONE is missing the point here. It may indeed be true that a multibillion-dollar public offering of China Construction Bank (CCB) scheduled for the third quarter of this year can continue and that investors will still view it favourably.

I am not sure the reason they would do so is that they are realistic. I rather think that in these matters investors are fickle and favour the flavour of the month. My experience in a previous career as an investment analyst is that the success of public offerings has less to do with the merits of what is offered than with market sentiment at the time.

But, with reports of corruption investigations also in the air, one can hardly talk about the sacking of the bank's chairman, Zhang Enzhao, as only possibly triggering a series of problems when that series of problems has already long been triggered.

This is at least the fourth of the series in recent times by my count and I am only counting the problems that have emerged into public view. First there was the 1.1 billion yuan mortgage loan scandal that emerged from an audit of the bank's 2001 accounts.

Then there was the sacking and jailing in late 2003 of the bank's president, Wang Xuebing, on corruption charges. Next was the embezzlement of US$8 million at a branch in Jilin province earlier this year and now we have the chairman sent packing within only seven months of his appointment.

Duck for cover. This sounds more like a burst of machine-gun fire whistling overhead than someone reaching for the trigger for the first time. More to the point, it introduces the question of what gives investors comfort that their money is securely invested. There are the laws against cheating shareholders and these are all very well for what they do, but find me the investor who believes he sees a gang of corporate pirates and yet gives them his money because he thinks the law will protect him. There are limits to what laws can do.

In the end it comes down to what that archetypal old investment banker, John Pierpoint Morgan, once told a congressional committee in the United States when he was asked a straight question - What is the foundation of modern finance, money or profit? Neither, said Morgan. The foundation of finance is trust.

He was absolutely right. The only way that sophisticated securities markets can work is if the people involved in them trust each other. This is not to say that trust is never broken. It obviously is and markets can incorporate a measure of the risk of broken trust into their pricing. But there comes a point when the failure of trust is just too great and then financial markets break down.

Thus it seems to me a little offhand when someone says in effect: 'Ah, what the heck, one chairman down, another in his place. Why worry? Life goes on.'

I do not say that mainland markets have reached the point where trust is so often and so deeply betrayed that they can no longer function properly but the mainland in particular would do well to recognise that such a point exists and that the closer one comes to it the less efficiently markets work.

Corruption is naturally endemic to a command economy. True market economies have little room for it. The profit margins are too tight. But command economies that do not concern themselves with such piffling considerations as return on investment have virtually endless scope for corruption.

And it is particularly so with what passes for banks in command economies. Not only do their credit officers have no experience or guidelines (none can exist) for pricing capital properly, but they fall easily into line with commands from on high about where to direct lending. The alternative can be a sacking.

It is an environment that quickly breeds cynicism and cynicism in finance quickly breeds financial crime. If the boss is an old hack who spends his working day pandering to political favour when he is not funding his cronies, why should he be the only one in the bank who is allowed to dip his fingers into the till? It does not take long for it to become common practice.

And that is why I think malfeasance at CCB should not be so blithely dismissed. It may still be that the bank's problems are isolated ones but it is not wise to start from that assumption and I certainly would not recommend it to investors in a public offering.