Banks (2004) broadly categorizes the corporate governance models across the globe into three categories namely Anglo-American model, Relationship model and Hybrid model. Anglo-American model, followed in countries such as the US, Britain, Canada, and Australia, gives importance to the protection of shareholders' interests. The relationship model followed in Continental Europe and Japan gives importance to all the stakeholders, particularly employees and creditors (Aoki, 1990; Hoshi et al., 1991; Clarke and Bostock, 1997; Hopt and Wymeersch, 1997; Plender, 1997; Waddock and Graves, 1997; and Franks and Mayer, 2001). The hybrid models followed in the developing countries provide a mix of the first two with lesser effectiveness. But even within each category of corporate governance models, the country level practices differ to a greater extent. Every country has its own unique corporate governance pattern and the ownership patterns also differ to a greater extent (La Porta et al., 1999). At the same time, given the globalization wave, cross-border financial market interactions were also on the increase either through equity route or through debt route. The investors in the international market, particularly those from the US and the UK, expect the foreign firms to follow high corporate governance standards. This has increased pressure on the firms and countries to bring their corporate governance practices to international standards. This, in turn, results in the convergence of corporate governance practices. This convergence pressure is very high on the firms which are from the developing countries where the corporate governance mechanisms are not established properly. The People's Republic of China (PRC), one such developing country, is fast becoming one of the most important economic powers and its business firms are also spreading their wings fast in the global market. The acquisition of IBM's personal computer business by Lenova is an example of Chinese business firms becoming multinationals. Hence, they also face the pressure to match the best corporate governance practices of the western world. However, the Chinese corporate system itself is in infant stage as in China business was totally with the state-owned enterprises till the 1980s. China got its first corporate law only in 1993. This paper, therefore, analyzes whether the Chinese corporate governance practices are converging towards the corporate governance practices of the western world.

The researchers on corporate governance are divided on the issue of convergence of corporate governance practices. Khanna et al. (2004) identify that there are three strands of the literature have preceded the current debate on the convergence of corporate governance systems.

One set of researchers argue that the gravity of globalization is so powerful that the countries will converge their corporate governance practices. Hansmann and Kraakman (2001) argue that the global corporate governance systems are converging towards the Anglo-American model which focuses on the shareholders' interest and they suggest that it is indeed desirable. They designate this shareholder-oriented model as `standard model' and identify four more types of governance models, namely the manager-oriented model (adopted in the US from 1930s to 1960s), labor-oriented models (example of a labor-oriented model is the German style codetermination), state-oriented models (example: post-war France and Japan), and the stakeholder-oriented model (a variant on the manager-oriented and labor-oriented models. They argue that the shareholder primacy will predominate as there are other legal mechanisms to protect the interests of the other stakeholders). Further, the authors argue that the competitive pressures of global commerce will speed up the process of convergence. The other researchers like Coffee (1999) also agree with the view that convergence would happen. Hopt (1997) suggests that the needs and the chosen practice of large enterprises will force them to fall in line with American corporations.