Thursday 26 April 2018

Veteran regulator promoted to lead China's financial clean-up

Yi Gang will take up the position of governor of the People’s Bank fof China. Photo: Getty
Yi Gang will take up the position of governor of the People’s Bank fof China. Photo: Getty

Yinan Zhao, Kevin Hamlin, Xiaoqing Pi, and Miao Han

China has named Yi Gang to run its central bank, the 'Wall Street Journal' reported, elevating a long-serving deputy governor with deep international links to the forefront of efforts to clean up the nation's financial sector and modernise monetary policy.

China has named Yi Gang to run its central bank, the 'Wall Street Journal' reported, elevating a long-serving deputy governor with deep international links to the forefront of efforts to clean up the nation's financial sector and modernise monetary policy.

The National People's Congress, China's legislature, will almost certainly approve President Xi Jinping's choice for governor of the People's Bank of China (PBOC) in a formal vote due to take place today.

By promoting an official who has served as number two to incumbent governor Zhou Xiaochuan for more than a decade, China is signalling that it is seeking policy continuity.

The retiring Mr Zhou steered the institution through the global financial crisis, overhauled monetary policy tools and oversaw the elevation of the yuan to reserve-currency status during his record 15-year term.

Mr Yi inherits an institution that, while more influential at home and abroad than the one that Mr Zhou took over in 2002, faces much more complex challenges.

The most pressing will be calibrating a response to US Federal Reserve rate hikes this year, and pushing forward with Mr Xi's financial clean-up without crashing an economy that's heading toward a debt-to-output ratio exceeding 300pc.

A shake-up to the financial oversight system means the PBOC will soon be able to stand on the global stage buttressed by an enhanced role at home too.

The PBOC faces those tasks at a time of major institutional changes. China this month merged its bank and insurance regulators, a move which gave the central bank power to write rules for the financial sector, and likely makes it the most powerful body in the new Financial Stability and Development Committee.

The succession comes amid changes atop global central banks and their shift away from years of easy money.

Jerome Powell succeeded Janet Yellen as Fed chair in February and Bank of Japan governor Haruhiko Kuroda is set to begin another term.

European Central Bank President Mario Draghi doesn't conclude his time in office until late next year, but jostling over his replacement has already begun.

Mr Yi joined the central bank in 1997 and served in a succession of roles before promotions to deputy governor and administrator of the State Administration of Foreign Exchange.

As head of the currency regulator, he presided over expansion of the world's largest foreign reserve stockpile, which peaked in 2014 at nearly $4tn (€3.2tn), along with more loosening of currency trading restrictions and greater emphasis on increasing the yuan's international use.

Like Mr Zhou, Mr Yi is also a fluent English speaker with long-standing links to global economic leaders.

Mr Yi earned a business degree at Hamline University in St Paul, Minnesota, and a PhD in economics at the University of Illinois before moving to Indiana University at Indianapolis as a professor in 1986, according to his official PBOC biography.

Bloomberg

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