Executive Summary
The recent temporary shareholder meeting at Huishang Bank has brought longstanding internal conflicts back into sharp focus. Key takeaways from the event and its broader market implications include:
– The mid-term dividend proposal put forward by the Zhongjing faction, a major shareholder group, was decisively rejected, securing only 25.55% of votes in favor. This marks another setback in their decade-long campaign to increase payout ratios.
– The reappearance of Gao Yang (高央), the Austrian-Chinese businessman and head of the Zhongjing faction, after a seven-month absence signals unresolved tensions and his continued influence as a non-executive director despite past legal scrutiny.
– Huishang Bank’s persistently low dividend payout ratio, which stood at approximately 20.34% in 2024, remains a point of contention with significant shareholders, affecting perceptions of shareholder value and corporate governance.
– The bank’s planned A-share listing continues to face delays due to internal governance issues, including shareholder disputes and regulatory non-compliance, posing risks to its growth strategy and investor appeal.
– For institutional investors, this case underscores the importance of monitoring shareholder activism and governance standards in Chinese regional banks, as these factors can significantly impact stock performance and investment decisions.
A Pivotal Shareholder Meeting Reignites Old Conflicts
In the heart of Hefei, Anhui province, the corridors of the Huishang Bank building witnessed a familiar drama unfold this week. The 2026 first temporary shareholder meeting of Huishang Bank (3698.HK) was not merely a procedural event; it served as a stark reminder of the deep-seated rifts between management and one of its largest shareholder groups. Presided over by the bank’s President and Executive Director Kong Qinglong, the gathering’s significance was amplified by the presence of a notable figure: non-executive director Gao Yang (高央). His attendance, after an absence of seven months, immediately signaled that the long-running dividend dispute at Huishang Bank was far from settled.
The meeting’s agenda comprised five resolutions, covering structural changes like abolishing the board of supervisors and amending corporate bylaws. While these procedural items passed with strong majorities, the core financial battleground was a single proposal. The mid-term dividend initiative, requiring a simple majority for approval, failed spectacularly, garnering only 25.55% support versus 50.45% opposition and 23.99% abstention. This outcome directly thwarts the latest effort by the Zhongjing faction to extract higher cash returns from their investment.
The Specifics of the Failed Dividend Proposal
The proposal, formally submitted in January by Zhongjing Xin Hua and Wealth Honest Limited—both entities under the Zhongjing umbrella—sought a cash dividend of 1.87 yuan per 10 ordinary shares. Based on Huishang Bank’s total share capital of 13.89 billion shares as of June 2025, this would have amounted to a total distribution of approximately 2.597 billion yuan. This sum represents 30.06% of the bank’s net profit attributable to the parent company for the first half of 2025. The proposal’s framing was strategic, aiming to align the bank’s payout with a higher historical benchmark and address what the Zhongjing faction perceives as chronic under-distribution.
Historical Context: A Shareholder Relationship Spanning Decades
To understand the gravity of this repeated rejection, one must look back nearly two decades. The Zhongjing faction’s involvement with Huishang Bank began in 2007 through an investment vehicle jointly held with the Shanshan Group. Over the years, through participation in capital increases and the bank’s IPO, the Zhongjing faction’s stake once approached 15%, solidifying its position as a pivotal shareholder. As of the end of June 2025, their combined holdings still stand at a significant 10.59%, making them the bank’s second-largest shareholder after the Deposit Insurance Fund, which holds 11.22%. This substantial ownership has historically guaranteed them a board seat, with Gao Yang serving as a non-executive director since 2009.
The Zhongjing Faction and Its Enigmatic Leader
At the center of this financial standoff is the Zhongjing faction itself, a private investment group with a complex history and a leader who has navigated both business triumphs and controversy. Gao Yang (高央), born in 1966 in Qingtian, Zhejiang, and now an Austrian citizen, returned to China in 1989 to build his business empire. The Zhongjing Group he founded focuses on equity investments and private equity, with a portfolio spanning finance, real estate, and hospitality.
Gao Yang’s relatively low public profile was interrupted in August 2023 when reports emerged that he had been taken away to assist in an investigation. According to coverage by the Economic Observer, this was potentially linked to historical equity investments in Beijing Automotive Group. His return to public view at a Huishang Bank shareholder meeting in June 2025, and now again in February 2026, marks a cautious re-emergence. His persistent push for dividends suggests that, despite past uncertainties, he remains actively engaged in defending the faction’s financial interests at the bank.
Financial Distress Driving the Dividend Demand
The Zhongjing faction’s urgency for increased cash flow is not merely a preference for higher returns; it is increasingly a matter of financial necessity. The group has been grappling with debt pressures, exemplified by the default in 2024 on a bond named “16 Zhongjing 02” issued by its subsidiary Zhongjing Xin Hua. This liquidity crunch transforms the dividend proposal from a shareholder value issue into a critical funding mechanism for the faction. The repeated failures to secure higher payouts from Huishang Bank directly impede their ability to alleviate these pressures, creating a cycle of frustration and escalating demands.
A Decade-Long Battle Over Dividends and Governance
The dividend dispute at Huishang Bank is not a new phenomenon; it is a chronic conflict that has defined shareholder relations for over ten years. The bank’s dividend history reveals a consistent pattern of conservative payouts, particularly after its listing in Hong Kong. Between 2013 and 2015, the cash dividend as a percentage of net profit exceeded 30%. However, post-2016, this ratio plummeted, placing Huishang Bank consistently near the bottom among listed Chinese banks. In 2024, the dividend payout ratio was approximately 20.34%, a figure that major shareholders like the Zhongjing faction argue fails to adequately reward investor capital.
Chronicle of Rejected Proposals
The Zhongjing faction’s campaign to elevate dividend payments began in earnest in 2016 with a formal proposal to restore the payout ratio to the 2013-2015 levels. It was rejected. Undeterred, the faction has returned with similar proposals repeatedly. In 2023, they advanced a more aggressive plan: suggesting the bank raise its annual cash dividend ratio to 30% and pay a special dividend to compensate for the shortfall from 2016 to 2022. Subsequent proposals have met the same fate. This persistent pattern highlights a fundamental misalignment between the bank’s capital retention strategy and the return expectations of a significant shareholder bloc.
This dividend dispute at Huishang Bank is intertwined with broader governance critiques. In a 2017 interview, Gao Yang himself publicly criticized the bank’s corporate governance, alleging problems and a reluctance to correct混乱 (chaos), which he suggested had evolved into insider control. These tensions have also spilled over into other areas, such as a prolonged equity transfer dispute with the Shanshan Group in 2019. The Zhongjing faction’s attempts to divest its stake—having engaged with potential buyers like Dongjian International and Zhengwei Group—have so far been unsuccessful, trapping them in a position where influencing dividend policy remains one of their few actionable levers.
Huishang Bank’s Performance Amidst Internal Tumult
Despite the internal strife, Huishang Bank has demonstrated resilience in its operational metrics. As a leading regional bank in Anhui, it reported total assets of 2.30 trillion yuan as of the end of September 2025, ranking sixth among China’s city commercial banks by asset size. For the first half of 2025, the bank achieved operating revenue of 21.157 billion yuan, a year-on-year increase of 2.25%, and net profit attributable to the parent company of 9.109 billion yuan, up 5.55%. This growth trajectory indicates underlying business strength, even as governance challenges cast a shadow.
Governance Hurdles and the Stalled A-Share Ambition
A critical overhang on Huishang Bank’s valuation and future is its long-pending plan for an A-share listing. The board approved a domestic listing scheme as early as 2015, but the process has been stuck in the辅导 (guidance) phase. A regulatory guidance opinion disclosed in October last year explicitly cited several impediments, including the ongoing equity dispute between the Zhongjing and Shanshan factions. Other noted issues include non-compliant employee shareholding structures and the over-tenure of certain directors. These internal control problems are red flags for regulators and investors alike, directly impacting the bank’s ability to access the deeper capital pools of the mainland market. The persistent dividend dispute at Huishang Bank thus feeds into a larger narrative of governance risks that can deter institutional investment.
Market Implications and Strategic Insights for Investors
For sophisticated market participants focused on Chinese equities, the ongoing saga at Huishang Bank offers several critical lessons. Shareholder activism, particularly around dividend policies, is becoming more pronounced in China’s banking sector, especially among regional players. Investors must scrutinize not only financial ratios but also the dynamics between major shareholders and management, as these can precipitate sudden volatility or strategic shifts.
Evaluating Governance in Chinese Bank Stocks
The case underscores the importance of thorough due diligence on corporate governance structures. Key indicators to watch include:
– Dividend payout history and policy: Consistent underpayment relative to peers can signal potential shareholder conflict or overly conservative management that may not prioritize investor returns.
– Shareholder concentration and alignment: The presence of large, activist shareholder groups like the Zhongjing faction can lead to proposals that, while potentially value-enhancing, also create uncertainty and distract from operations.
– Regulatory compliance and listing status: For banks seeking dual listings, unresolved governance issues are major roadblocks. Delays, as seen with Huishang Bank’s A-share ambitions, can limit growth financing and affect stock liquidity.
– Transparency around director backgrounds and legal matters: The situation involving Gao Yang (高央) highlights how the personal circumstances of key board members can intersect with corporate governance, warranting closer attention from investors.
Forward-Looking Guidance for Portfolio Strategy
In the near term, the dividend dispute at Huishang Bank is unlikely to be resolved swiftly. Investors should anticipate continued volatility around shareholder meetings and potential spillover effects on the bank’s stock price. For those considering positions in Chinese regional banks, a prudent approach involves:
1. Diversifying across institutions with clearer governance records and more stable shareholder bases.
2. Engaging directly with bank management during investor relations meetings to understand their capital allocation philosophy and plans for addressing shareholder concerns.
3. Monitoring announcements from regulatory bodies like the China Banking and Insurance Regulatory Commission (CBIRC) for any directives on bank dividend policies or governance reforms that could impact the sector.
4. Considering the long-term implications of such internal conflicts on a bank’s ability to execute strategic initiatives, such as digital transformation or expansion into new business lines.
Synthesizing the Stakes in Shareholder Democracy
The repeated failure of the Zhongjing faction’s dividend proposal at Huishang Bank is more than a single voting outcome; it is a microcosm of the evolving challenges in China’s financial markets. It highlights the tension between bank management’s desire to retain capital for stability and growth, and shareholders’ rightful demand for transparent, fair returns on their investment. For Huishang Bank, the path forward requires balancing these competing interests while addressing the governance flaws that hinder its A-share listing. The dividend dispute at Huishang Bank serves as a cautionary tale for other regional lenders about the costs of prolonged internal discord.
For global investors, this episode reinforces the necessity of a nuanced investment framework for Chinese equities—one that equally weights financial performance, regulatory environment, and the often-overlooked human element of corporate governance. As shareholder activism gains traction, understanding these dynamics will be key to identifying both risks and opportunities. The next step for astute market participants is to incorporate governance risk assessments into their core analysis, ensuring that their portfolios are resilient to the kinds of internal conflicts exemplified by the ongoing situation at Huishang Bank.