The dismissal of Wang Xuebing as president of the China Construction Bank was the news of the week for Beijing's foreign business community. It was his post as president of the Bank of China for more than six years, before he took over the Construction Bank in February 2000, that made Mr Wang the country's most prominent international banker, often appearing at international conferences and seminars and Knowing many foreigners. The official reason for the dismissal was that Mr Wang was responsible for loans involving some branches of the Bank of China at home and abroad. The sudden removal of such a high-profile figure was a shock, but the revelations of problem loans was not. One American consultant said: 'I did some work with the Bank of China. I found a complete lack of internal controls and supervision of its domestic accounts. So I was not surprised to hear of malpractices in the bank. But I was surprised that it was Wang Xuebing, because he was so prominent and well-known abroad. 'The Bank of China should be the cleanest and best run of the four big state banks but has a surprisingly high level of non-performing loans.' The bank has admitted to a level of 28 per cent, and this is after it transferred billions of yuan in bad loans to an asset-management corporation, which each of the four banks set up. So, before the transfer, the level was higher than 30 per cent. A foreign banker estimated that the present level of non-performing loans at Construction Bank was 40-50 per cent and at Agricultural Bank of China up to 80-90 per cent. These are two of the big four, with Industrial & Commercial Bank of China the fourth. The banker said: 'All these things make a mockery of the official figures on non-performing loans. There are so many off-book accounts. The authorities have no idea what is happening in their banks. 'From this perspective, the condition of the big four Chinese banks is worse than that of the Japanese banks. The big difference is that the yuan is not convertible, so it is a closed system. It is the high savings rate of the Chinese public that sustains the system.' Figures published on Friday showed that individuals held a record 7.4 trillion yuan (about HK$6.93 trillion) in domestic banks at the end of last year, an increase of 14.7 per cent over a year earlier, and foreign-exchange deposits amounted to US$81.56 billion, up 11.8 per cent - more than the reserves of most countries. For the banks to remain solvent, it is necessary that the public leave their money in them. Panic withdrawals, like those made by Argentinians during the last month, would expose the insolvency of the banks. Fear of provoking such withdrawals may be one reason why the mainland media has been ordered not to report Mr Wang's dismissal, even after it was confirmed last Tuesday at a press conference given by Dai Xianglong, governor of the central bank. The authorities do not want to do anything to shake the public's confidence in their banks. This lack of transparency troubles foreign bankers. One said: 'We have been given no details of the reasons for Mr Wang's dismissal. This must affect our confidence in the Bank of China and its listing plans. We need to know what we are buying. The authorities must provide more explanation.' The bank said that, despite the dismissal, it still planned to list its Hong Kong operations in Hong Kong and New York in the first half of this year. The news on Friday that the Bank of China would pay a fine of US$10 million to US$20 million to the United States for wrongdoing at its New York branch, one of the largest US civil penalties imposed on a bank in recent years, seems to provide the explanation for Mr Wang's dismissal. He was chief of the New York branch from 1988 to 1993 and president of the bank from December 1993 until February 2000. But the People's Bank of China has made no public statement on the fine and the mainland media had not reported it or the dismissal. The consultant said: 'A scandal within China can be managed. But, if it touches the US it is very hard to control. That may have forced the authorities to move. 'The other possibility that can never be excluded in the case of senior personnel changes is that his dismissal is part of the power struggle ahead of the party congress this year. If Mr Wang belongs to any faction, it is that of Premier Zhu Rongji, who could not or would not protect him.' For his part, Mr Zhu tried to put the best spin on the situation. Speaking last week in India, where he was on an official visit, he said the level of non-performing loans would not affect the Bank of China's listing plans and changes at the top of the bank would not affect the confidence of foreign investors in China.