Mr Richard Ong, an ethnic Chinese born in Malaysia, did not write Chinese well enough to take a mandatory test for senior managers, said the bankers, who declined to be identified as the matter is private.

New York-based Goldman instead promoted Mr Zha Xiangyang, deputy CEO of its China joint venture, Goldman Sachs Gao Hua Securities, in May.

Government rules requiring language skills may hurt the efforts of investment banks to attract top employees to China.

Citigroup, Morgan Stanley and JPMorgan Chase are seeking joint-venture partners in China, where a record US$16.3 billion (S$24.7 billion) was raised in stock sales during the first half of the year.

'When you start putting a language requirement on it, it dramatically reduces the pool' of talent, Mr George Fifield, managing director of Korn/Ferry International Consulting (Beijing), said.

'It's going to diminish the quality of the team, whether it's on the board or senior management.'

China began requiring senior executives to take the test in 2004. Managers in place before then have until 2009 to pass the exam before losing their titles.

The language requirement applies to CEOs, deputy CEOs and the heads of supervisory boards at locally incorporated securities firms, according to the industry regulator. The test includes both written and verbal components.

The China Securities Regulatory Commission (CSRC) has stepped up enforcement since December, though it can still grant exemptions for foreign executives. It said on Nov 30 that it would punish securities firms that appoint managers who have not passed the exam.

Goldman, the world's biggest securities firm by market value, moved Mr Ong, 42, to Beijing from Singapore last year to head its China operations. This was after former Asia co-head of investment banking Bill Wicker moved back to New York and Goldman China CEO Joseph Stevens quit in October to join Standard Chartered, the London-based bank that makes most of its money in Asia.

Mr Ong, who headed the Singapore office for about four years, declined to comment, as did Goldman spokesman Edward Naylor. The CSRC did not respond to queries.

Mr Zha, 40, is a co-founder of Chinese brokerage Gao Hua Securities. Gao Hua owns 67 per cent of Goldman Sachs Gao Hua and Goldman controls the rest.

Goldman is the third-biggest foreign underwriter of stock sales in China and Hong Kong this year, after Morgan Stanley, the second-biggest US securities firm, and Zurich-based UBS, according to data compiled by Bloomberg.

Goldman and UBS, Europe's largest bank by assets, are the only foreign investment banks licensed to underwrite domestic share sales in China, where the economy expanded at 11.1 per cent in the first quarter from a year earlier.

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Mr Richard Ong, an ethnic Chinese born in Malaysia, did not write Chinese well enough to take a mandatory test for senior managers, say bankers.