People’s Bank of China Seeks New Leader
Speculations abound as to who will become the new head of People’s Bank of China (PBOC)—the country’s Central Bank. Five candidates are in the running as markets worry about continued reform.
Zhou Xiaochuan, the current governor failed to be reelected as a member of the Party’s Central Committee during the 18th Party Congress and is expected to retire as he is already 65 years old. According to the convention of the Chinese Communist Party (CCP), membership in the Central Committee is required to assume the head position of the PBOC.
The five financial officials elected to the Party’s Central Committee during the 18th Party Congress are likely candidates. They include Guo Shuqing, chairman of China Securities Regulatory Commission (CSRC); Xiang Junbo, chairman of China Insurance Regulatory Commission; and Shang Fulin, chairman of China Banking Regulatory Commission.
Oxford-educated Guo Shuqing, 56, is the top candidate so far. When Guo worked at the State Development Planning Commission, he conducted research under the tutelage of Wu Jinglian, one of China’s top economists, charting the course of China’s national economic reform.
Since becoming chairman of the CSRC in October 2011, Guo has installed several new policies such as mandatory dividend payments by listed companies, zero tolerance of insider trading, IPO system reform, and encouragement of innovations in securities trading, according to state media reports.
The Southern People Weekly said that within 100 days of his taking the position, Guo turned from being a mere scholar on reform to an implementer. During an interview with Japan’s Asahi Shimbun, he said he “believes in the market and in reform.”
Xiang Junbo, 55, has a PhD in law from Peking University and is a former chairman of the Agricultural Bank of China. The bank’s non-performing loans dropped significantly after he joined the bank in 2007, according to Radio France Internationale (RFI). Xiang is presently chairman of China Insurance Regulatory Commission.
Shang Fulin, 61, is chairman of China Banking Regulatory Commission. He has a Ph.D. in finance, and has already worked at the PBOC for many years. Shang is known for his prudence.
The PBOC is part of the State Council. All important decisions, including interest rate adjustments, are made by the State Council. Analysts believe that the departure of current head Zhou Xiaochuan will not have any immediate impact on China’s currency policies.
During Zhou’s tenure as head of the PBOC, there has been an over issue of currency. China’s broad money supply surpassed 94.37 trillion yuan (US$15 trillion) at the end of September, which was twice the country’s gross domestic product in 2011 and 1.5 times higher than that of the United States.
This was widely viewed as the cause of China’s inflation. However, Zhou has published articles claiming that China did not have excessive printing and circulation of money.
In 2005, the regime decided that eventually the yuan should float freely versus the dollar. Rather than making an abrupt change and abandoning the peg, the exchange rate should gradually appreciate to “fair” value. As a result, the still tightly managed yuan went up 30 percent against the dollar since 2005.
While Guo was chairman of the CSRC in the past year, the Chinese stock market remained depressed. A total of 3.2 billion yuan (US$512 million) have evaporated from the Chinese stock market, according to Taiwan’s United Daily News.
Despite this, before the 18th Party Congress, the market still had high hopes in Guo’s market-oriented reform, a security insider told Chinese Reuters. Now that the congress is over, it is not clear whether reform will be pushed forward or even exists, he said.
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