China has been busy replacing officials in top government roles today: right around the time news broke that Beijing had abruptly replaced its recently "vanished" foreign minister Qin Gang with his predecessor Wang Yi, we also learned that Beijing named Pan Gongsheng as new governor of the central bank, strengthening his position as head of the institution tasked with boosting the world’s second-largest economy.
Pan, 60, was appointed by the Standing Committee of the National People’s Congress on Tuesday, replacing Yi Gang, who has reached the official retirement age of 65 for minister-level officials, state media reported. A former deputy at the People’s Bank of China, Pan had already been named the Communist Party secretary at the PBOC earlier in July, putting him in one of the two top slots at the bank.
As Bloomberg reports, Pan - who has been a long-time central banker - joined the PBOC in 2012 after previous stints in senior positions at giant state banks including Industrial and Commercial Bank of China and Agricultural Bank of China. His move to the top of the PBOC "signals that Beijing is prioritizing policy continuity at a time when the economic recovery is losing momentum and officials are grappling with various ways to boost confidence." Some more details from Bloomberg
Since his appointment as party secretary at the PBOC, Pan has held several meetings with visiting central bankers, including South Korea’s Rhee Chang-yong, and attended a central bank governors conference between China, Japan and South Korea in July. US Treasury Secretary Janet Yellen referred to Pan as “acting governor” when she met with him during her Beijing trip recently.
More importantly, his appointment marks the first time since 2018 that the top two positions at the PBOC — governor and Communist Party secretary — will be held by one person, streamlining decision-making at the very top. Former governor Zhou Xiaochuan held both posts until his departure in 2018, when Yi Gang was named governor and Guo Shuqing held the position of party chief.
Curiously, Pan had actually exited the Communist Party’s elite Central Committee late last year, which to some was a signal that he was on his way out. Without that senior role in the party, there are questions over the central bank’s influence, given the Communist Party’s increasing control over the financial sector under President Xi Jinping.
Unlike the US Federal Reserve and central banks in Europe, the PBOC is not independent (spoiler alert: the Fed isn't independent either, but it pretends to be for popular consumption). It answers to the State Council, China’s cabinet led by Premier Li Qiang, and needs approval before making major policy decisions such as setting interest rates or managing the currency.
In addition to being deputy governor, Pan was also head of the State Administration of Foreign Exchange (SAFE) since 2016, China's regulator overseeing the country’s $3 trillion in foreign reserves. That experience will stand him in good stead as the PBOC seeks to stabilize the currency amid heightened investor uncertainty. The yuan is down almost 4% against the dollar this year, among the worst performers in Asia.
Looking ahead, at the top of Pan’s priorities will be "steering the economy through its current downturn, which is weighing on financial markets and worrying businesses" according to BBG. Indeed, investors have been clamoring for more monetary stimulus since interest rates were cut in June, though the central bank under Yi has taken a cautious approach, focusing on curbing financial risks.
So far, foreigners hoping for a massive stimulus in China have been repeatedly disappointed. That said, one thing is certain: the key to the economy’s recovery is a rebound in the property market, which remains in a slump after more than two years of restrictions to curb the sector. While Pan has been viewed as more hawkish on property regulation, the Communist Party’s Politburo on Monday signaled a dovish shift in stance, hinting at likely easing in policies in coming months.
