China reshapes economic team, appoints Yi Gang as central bank governor

Yi Gang, who was named governor of the People's Bank of China, talks to the media, in Beijing | Photo: Reuters
China elevated a key confidante of President Xi Jinping to one of the top positions in government on Monday as Beijing cracks down on riskier financing and a debt build-up that may pose systemic risks to the world’s second-largest economy.


The endorsement of Liu He as a vice-premier by the country’s largely rubber-stamp parliament also comes as the United States presses China to cut its trade surplus by $100 billion. Harvard-educated Liu, 66, was the most prominent envoy to visit Washington recently to prevent the outbreak of a trade war.


While most of the personnel changes on the government’s economic team were widely anticipated, the choice of Yi Gang as the new head of the People’s Bank of China (PBOC) was unexpected.


Yi had been a vice-governor of the PBOC and a protege of outgoing chief Zhou Xiaochuan. His appointment was seen as pointing to continuity in monetary policy even as one of the world’s biggest central banks was gaining considerable new regulatory powers.


Yi will have a weighty first test — the U.S. Federal Reserve is expected to raise interest rates on March 21, a day after China’s annual parliament ends, and markets are keen to see if the PBOC follows with a modest move of its own.


Yi boasts more policy know-how than political heft as he takes the helm of the PBOC.


The 60-year-old Yi boasts more than two decades of experience in the central bank he will now run.


As No 2 for more than a decade, the former Indiana University economics professor also managed the country’s foreign exchange policy from 2009 to 2016 — a time when currency reserves were growing toward $4 trillion and China was easing trading restrictions on the yuan and increasing its international use.


What he lacks is the political standing of his predecessor, meaning he’s set to take direction from above. He was quick on Monday to signal he would maintain the PBOC’s recent policies.


The head of a newly merged banking and insurance regulator is also expected to be announced soon. Reform-minded Guo Shuqing, 61, the current chair of the China Banking Regulatory Commission, is viewed as the leading candidate.


Liu He is expected to help improve supervision and coordination among regulators and the central bank to fend off financial risks, as head of the cabinet-level Financial Stability and Development Commission (FSDC).


That would put Liu on a similar standing with former economic tsar Zhu Rongji, known for his tough handling of hyperinflation and the economic chaos in the 1990s.


Zhu held both the posts of vice premier and central bank governor simultaneously from 1993 to 1995, and went on to become China’s premier in 1998-2003.


As Xi begins his second five-year term as president, Beijing is streamlining regulators and ministries to reduce inefficiencies while expanding the remit of others such as the central bank to boost their policymaking powers.

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