The stock market has viewed it unkindly as a bellwether of Beijing's anti-corruption campaign. Given its management structure, with senior executives responsible to China's top political leadership rather than to shareholders, it is seen as a natural incubator for corruption. In early January last year when Premier Zhu announced a renewed crackdown on corruption, China Everbright was the hardest-hit of the red chips - Hong Kong-listed mainland companies.

Another good thing about the investigation, from a corporate governance perspective, is that it puts pressure on China Everbright to stop such practices as shuffling assets around within the group to inflate the performance of a selected subsidiary.

These practices may have been appropriate in the past under state ownership, but if China's capital markets are to evoke confidence, listed companies need to abide by the rules.

There also may be a silver lining from the perspective of China Everbright itself. Professionalism, discipline and transparency are consistent with objectives set out by the group almost two years ago, as part of an effort to prepare for China's entry into the World Trade Organisation.

In December 2000, China Everbright signed a pact with the three other original red chips - China Merchant Holdings, China Resources and China Travel Services - for 'mutual assistance' in asset restructuring. The idea was for each to concentrate on core competencies, with China Everbright as the lead company in financial services.

Zhu Xiaohua, head of the State Administration of Foreign Exchange Control (Safec) and a protege of Premier Zhu, arrived in Hong Kong in 1995 to oversee the diversification of the conglomerate into property and telecommunications. The acquisitions were fuelled by injections of capital from Beijing, but the resulting debt proved unmanageable.

A series of management changes ensued when China Everbright reported losses of HK$389 million in 1998, including Mr Zhu's sudden and unexplained removal in July 1999.

China Everbright's aim to become a global financial services conglomerate was linked to its plans for an initial public offering (IPO) of China Everbright Bank, originally planned for last year.

The bank had all sorts of help in preparing for the listing. In 2000, the Ministry of Finance took US$845 million in non-performing loans off its books. This type of help is not likely to be forthcoming as a result of the investigation, and the IPO has been shelved indefinitely.

In addition to China Everbright Bank, the group has a 49 per cent share in Everbright Securities, China's second-largest underwriter, 20 per cent of Hong Kong-listed International Bank of Asia, a 20 per cent stake in a joint venture with Standard Life (Asia), and a new joint venture with Sun Life Financial of Canada. In the non-financial area, it controls China Everbright International, China Everbright Technology and Hong Kong Construction.

The group has its work cut out if it is to rescue its ambitious corporate strategy. Although profits in 2000 appeared healthy, at HK$1.2 billion, they were propped up by sales of securities.

In March the company reported a 71 per cent drop in net profits for last year to HK$371.4 million. Of this amount, HK$271 million came from the partial payment of a judgment against Malaysian businessman Ch'ng Poh, a former chairman.

Despite silver linings and the generally healthy impact of regulatory discipline, these cannot be happy times for China Everbright chief Wang Mingquan.

Appointed in June 2000, Mr Wang was a high flier who moved to the conglomerate from Shanghai-based Bank of Communications, widely considered the mainland's most progressive, market-oriented government bank. The scandal at China Everbright Bank was on his watch and may reflect badly on him.

Nonetheless, even Mr Wang may be relieved that the long investigation has come to an end. It concludes a series of events that has mystified Hong Kong.

In the three years since Mr Zhu was removed, there has been no official clarification of the charges against him. His former deputy, Shao Zhengkang, failed to return from a business trip to Beijing after Bank of China chairman Liu Mingkang announced that an investigation was underway nine months after Mr Zhu's disappearance. Mr Liu ran China Everbright between February and June 2000, before Mr Wang's arrival.

In May 2000, Mr Zhu's successor at Safec, Li Fuxiang, fell out of a seventh floor hospital window in Beijing after checking in with symptoms of fatigue and diabetes.

There have always been suspicions of a link between Mr Li, Mr Zhu and more recently the high-profile fall of former Bank of China executive Wang Xuebing.

Such murky intrigues, in the light of the well reported findings by the Ministry of Finance, point in one direction - towards more separation between business and politics. Such separation is no guarantee against corruption and inefficiency, but it is a start.