China Central Bank Chief Set to Keep Job in Reshuffle
Stephen: While many banking chiefs are either closing or being shown the door to the end of their roles, it seems that the ‘reformist’ at the head of China’s central bank is being asked to stay on beyond retirement age. Apparently, he’s to continue to assist with solving China’s ‘wealth gap’.
By Reuters reporters, CNBC – February 20, 2013
China’s central bank governor, Zhou Xiaochuan, is set to keep his job next month despite reaching the mandatory retirement age of 65, sources said, in a bid by Beijing’s new leaders to maintain the momentum of financial reform.
Two sources with ties to China’s Communist Party leadership and two senior financial industry sources said that, barring last-minute changes, Zhou, would be made a vice chairman of parliament’s top advisory body to give him “national-level leader” rank that would exempt him from compulsory retirement.
Zhou’s future has been in question since he was left out of the elite 205-member Central Committee of the Communist Party during a once-in-a-decade handover of power last November. Until now, membership has been a condition of holding a ministerial-level job such as the People’s Bank of China governor.
But with the party’s top leaders, Xi Jinping and Li Keqiang, apparently determined to deliver on promises to close a chasm between China’s rich and poor, a way has been found to keep one of the driving forces behind a decade of financial reforms.
“It’s almost certain Zhou Xiaochuan will not retire this time and will stay on as governor,” a source with leadership ties said, requesting anonymity to avoid repercussions for speaking to foreign reporters without authorization.
It is unclear how long Zhou would remain central bank chief, but a second leadership source said he was needed to drive reforms to unshackle China’s currency from capital account controls – which analysts believe the People’s Bank of China (PBOC) aims to make basically convertible by 2015.
“For now, Zhou will not move. There is no better candidate. He is needed to carry out currency reforms,” a second source with ties to the leadership said.
The central bank declined to comment when reached by telephone.
The party’s Central Committee will hold a conclave in late February to finalise a planned reshuffle of cabinet positions. The role of PBOC chief is equivalent to a cabinet minister.
Zhou, who took control of the PBOC in 2002, is the architect of broad financial reforms that have spawned fledgling capital markets, liberalized some interest rates and broken the peg between China’s yuan and the U.S. dollar – a step along the path to turning it into a global currency on par with the greenback.
He turned 65 – the compulsory retirement age for a cabinet minister – last month, resulting in the widespread expectation that he would be forced to retire in the reshuffle during the annual full session of parliament, which begins on March 5.
Some analysts are skeptical he would be able to stay on.
“Zhou Xiaochuan’s rich professional experience laid a solid foundation for him to accurately assure macro-economic direction and adjust monetary policy,” China Construction Bank senior economist Zhao Qingming said. “But the chances of letting him continue in the job should be very low.”
The clutch of names circulating as potential replacements for when Zhou eventually steps down include Bank of China chairman Xiao Gang, 54 – the front-runner according to sources with leadership ties and senior financial sector insiders – Guo Shuqing, 56, chairman of the China Securities Regulatory Commission, and Shang Fulin, 61, chairman of the China Banking Regulatory Commission.
Xiao, Guo and Shang are members of the Central Committee.
When Zhou eventually retires, Xiao will replace him, the sources said.
“Xiao Gang will (initially) be appointed party secretary of the People’s Bank of China,” one financial industry source said, in a move that would annoint Xiao as Zhou’s successor.
Lou Jiwei, 62, chairman of China Investment Corp, the country’s $482 billion sovereign wealth fund, had also been linked to the PBOC job. But he is likely to take over as finance minister, the sources with leadership ties said.
Reforms that further stimulate capital markets, improve returns to hundreds of millions of Chinese savers and boost investment options for the growing middle class are seen as vital to closing a wealth gap now at levels that a government index suggests requires urgent action.
Decades of economic reform have made some Chinese very rich and brought prosperity to an urban middle class. But many, particularly in the countryside, have been left behind, creating social tensions that worry the leadership.
China unveiled sweeping tax reforms this month to make wealthy state-owned firms, property speculators and the rich pay more to narrow the gap. The plans approved by the State Council – China’s cabinet – also included commitments to push forward market-oriented interest rate reforms.
Reform would boost private firms’ access to capital while cutting its cost, engender more efficient allocation of financial resources and provide the instruments needed to underpin social spending and urbanization plans.
Foreign Policy, a magazine aimed at global leaders and decision-makers, ranked the reform-minded Zhou fourth in its Top 100 Global Thinkers report in December 2010.
Senior sources in China’s state-directed financial system say no other senior financial-sector leader had better reform credentials than Zhou.
“The big debate right now is whether to speed up or slow down reforms. Governor Zhou is clearly a reformer,” said one former PBOC official and now a senior executive at one of China’s “Big Four” state-backed banks.