China Minsheng Banking Corporation's chairman of the board, Jing Shuping, enters the room with a patrician air. Tall and silver haired, his mandarin carries traces of his home town, Shanghai, as does his elegantly tailored suit. His charm and friendliness are pleasantly old-fashioned.

This man is a living legend in Chinese banking circles. He was a prominent entrepreneur in pre-revolutionary Shanghai, where he traded gold, and built up a cigarette and chemicals business. And despite the ups and down he must have been through after Shanghai's untrammeled capitalism was checked by the Communist Party, he looks in excellent health.

Jing Shuping met up with FinanceAsia in a traditionally appointed meeting room in the company's guesthouse. Ironically, the guesthouse, reassuringly unpretentious, is situated in the bureaucratic heartland of the city, Zhengyi Lu, close to Tiananmen Square. It is ironic because Minsheng Bank is, in its way, a revolutionary creation. It is a genuine private bank, and aimed at the country's private sector, espcially its small to medium enterprises.

Set up six and half years ago by Jing Shuping and a member of the family-owned pig-feed company Hope Group, it raked in profits of Rmb 608 million ($73.5 million) last year compared to Rmb 429 million in 2000. Total loans jumped 96% to Rmb 73.56 billion last year. The company listed on the Shanghai stock exchange in December 2000, just four years after its creation. Still, the scale of the bank is dwarfed by the Big Four state banks, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Band of China and Bank of China.

But then as Jing points out it does not get the state support these banks benefit from and it is profitable, which is more than can be said for the state banks. Almost seven years ago, in 1995, it was obvious to the founders of the bank that China's emerging private sector was being served inadequately by the existing policy banks. "We saw the opportunity to grow fast alongside China's private sector, and to provide them with the banking and financing facilities that are were almost completely unavailable at that time," Jing explains.

The unique aspect of Minsheng is that it has no government stake whatsoever, an important aspect of the bank's success. This does not just extend to the absence of a direct government stake by a ministry such as China Mobile or the other state giants have to endure, but also to the companies which have taken a stake. Private companies own 82% of the shares, compared to state-invested companies owning just 12%. The two largest stake-holders are the The New Hope Group and Orient Group. The former is a spin-off of the original Hope Group, while the latter is engaged in real estate and construction in the North East of the country.

On the whole, though, share ownership is dispersed with no single investor having a sufficiently large stake to influence the bank's lending practices Jing says. That puts in a class of its own, even within the category of modern-minded, relatively new banks such as China Merchants Bank and Bank of Shanghai, two other domestically listed banks.

However, neither of these banks are as free from state interference as Minsheng, says Jing. He reserves a caustic comment for Bank of Shanghai. "When Bank of Shanghai was reorganized out of numerous banking cooperatives, BoS changed its real name of Bank of Shanghai City to Bank of Shanghai," he says. "It was a good marketing strategy to leave out any hint of government affiliation."

The creation of Minsheng reflects the government's attitude to reform, says Jing. "We were allowed to go ahead because the government saw us as a test case for the financial system. The government was very pragmatic in that respect. It knows the financial system had to be reformed and it gave us the status of an experiment.

"The bank's freedom from government interference has been a major competitive advantage," he continues. "We don't have to hand out loans on local or central government demand, like the state banks, which means that we can make loans based on our perception risk. Credit risk is something we take very seriously."

He also notes that while Minsheng's NPL's stand under 3%, those of the Big Four, are opaque and could easily total 40% according to the calculations of numerous experts. Minsheng Bank also succeeds in attracting good quality recruits in spite of its small size, since Minsheng is perceived as a fast growing, non-bureaucratic organization by ambitious graduates.

"We tend to pay at the upper end of the range, so we can get the skilled executives we need," he says. Minsheng plans to add more sophisticated products to the bank's main revenue earners, corporate banking and loans.

An agreement with US insurance giant AIG is being discussed, and the bank is moving aggressively into consumer banking, as the numerous advertisements for everything from cars to mortgages testifies.

"The growth in China's private sector has been accompanied by a surge in individual wealth, and it's part of our aim to be involved in that growth," he says.

But surprisingly, mortgages, despite the construction boon and the rising number of middle class consumer, is not something Jing especially favours, at least not in Beijing.

"The problem in Beijing is that house prices are especially expensive, since most properties are acquired by companies and government entities, which often sell to long-serving officials at a discount," he comments. This is not surprising since Beijing is a highly centralized political entity, where all the country's numerous ministries and state owned giants have their headquarters in contrast to Shanghai and especially the southern and central cities of Shenzhen, Guangzhou and Wenzhou, where the private sector contributes far more to GDP.

"This makes it very hard for the average consumer to buy," he argues "and the down payment is also high, at around 30% of the total cost of the property."

Shady practices amongst property companies also make risk assessment difficult, since developers who cannot sell off their properties will sign them over to their employees. The employees then apply 'en masse' for loans.

"That's the kind of practice the bank has to bee on the look out for," he says.

Jing speaks chirpily of the future, and in light of the bank's growth rate, he has every right to. His eyes narrow, however, when FinanceAsia asks him how the bank's risk management operates in a country where the main input, the raw statistics, is often corrupt. The answer comes fast, and is in some ways irrefutable.

"Look at (the rating agencies) Moody's and Standard & Poor's. They didn't help in advance of the corporate collapses we are seeing on the US stock markets," he says with a hint of triumphalism. "We're doing our best, but considering the problems in the US it's unrealistic to expect us to run before we can walk."

An amazing scam pulled off by one the bank's clerks over several years and only detected earlier in February cost the bank Rmb 108 million, but Jing says it reinforced the bank's determination to improve management and risk control techniques.

The next step for this bank is a foreign listing, but Jing says there are many obstacles concerning a listing by a financial institution, in particular China's closed capital account and the long queue of companies that want to access foreign markets. It should only be a matter of time, however, before this pocket Hercules of a bank becomes as well known abroad as it is in China.