Apart from the head of the US Federal Reserve and the Reserve Bank of Australia, the identities of central bankers are not really important to most investors – but at the weekend, Chinese President Xi broke with convention and reappointed the head of the People’s Bank of China.
PBOC Governor Yi Gang, 65 was widely forecast to be replaced, ostensibly because he had reached retirement age.
Coming a day before US regulators seemingly staved off a contagion from the collapse of Silicon Valley Bank, the keeping of an ‘old hand’ at the head of one of the world’s most important central banks was unusually well-timed.
The news was a shock for markets because his replacement had been widely expected since last year’s Communist Party Congress last October saw the wholesale changing of senior leaders in the Chinese government, including Premier Li Keqiang. Yi had actually disappeared from the list of leadership officials appointed at the Congress.
But on Sunday China’s rubber stamp parliament, the National People’s Congress unexpectedly reappointed 65-year-old Yi as governor of the People’s Bank of China.
The reappointment was seen as a big positive – Yi has experience of the issues both driving Chinese growth in recent years, and holding it back, such as the continuing property crisis.
The central bank governor acts as spokesperson for monetary policy, is the most prominent Chinese figure in global finance and is in charge of reassuring bankers and investors at a time when China’s economy is emerging from drastically slower growth.
The PBOC governor has high global exposure through institutions such as the Group of 20, the International Monetary Fund, the World Bank and others groups.
He also has considerable experience dealing with foreigners, led by the US (and Australia for that matter – he gets on well with the RBA officials) with links that will become more important if the global economy starts sliding towards recession.
And economists pointed to the link to the GDP target for this year of “around 5%”. Re-appointing the top of monetary policy official adds credibility to the GDP target and to what flow of statistics emerges from the government this year.
A veteran monetary policy expert, Yi was first appointed governor of the People’s Bank of China in March 2018, taking over from the highly-regarded Zhou Xiaochuan.
Before becoming governor, Yi spent 20 years at the central bank after getting his Ph.D. from the University of Illinois and working as a professor of economics at Indiana University from 1986 to 1994.
The party made a similar decision to opt for continuity in 2013, when then-PBOC governor Zhou, who already had been in the job for a decade, stayed on as governor while all other economic regulators changed.
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Sunday at the congress also saw some uncharacteristic straight talking from Kang Yi, the new boss of China’s statistics bureau head, who told state media on Sunday that China’s economy still contains deep structural “contradictions” and “problems”.
Kang, appointed as the new head of the National Bureau of Statistics (NBS) earlier this month, reportedly made the comments while taking questions from reporters on the sidelines of the annual parliamentary meeting.
“There are still many uncertainties ahead of China’s economy,” said Kang. “Domestically, there are still some deep-seated structural contradictions and problems in the economic operation.”
China set a modest target for economic growth this year of around 5%, which was announced last week at the parliamentary meeting.
The economy gave one of its weakest performances in decades last year, when gross domestic product (GDP) grew by just 3%, squeezed by three years of COVID controls, a crisis in the vast property sector and a crackdown on private enterprises.
Kang is a former vice mayor of the northern city of industrial city of Tianjin.
His first big task is overseeing this Thursday’s release of the January and February data on retail sales, industrial production, unemployment, investment (especially the important data on property investment and sales).
