China named Pan Gongsheng as 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 National People’s Congress Standing Committee on Tuesday, replacing Yi Gang, who reached the official retirement age of 65, according to state media. A former deputy at the People’s Bank of China, Pan had already been named the Communist Party’s secretary at the PBOC this month, putting him in one of the bank’s two top slots.
Pan is a long-time central banker. He joined the PBOC in 2012 after stints in senior positions at state banks including Industrial and Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. His appointment signals that Beijing is prioritising policy continuity at a time when the economic recovery is losing momentum and officials are grappling with various ways to boost confidence.
Since he was made party secretary at the PBOC, Pan has held 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.
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, potentially 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.
Like Yi and Zhou, Pan is seen as a technocrat who has pushed for reforms in areas such as the banking sector and the exchange rate. In other areas like property, however, he has taken a more risk-focused approach and promoted harsh policies that clamped down on perceived sources of instability.
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“Pan Gongsheng’s appointment is a positive omen for continued, although still gradual, market-oriented reforms that further liberalize financial markets and the exchange rate and promote capital account opening,” said Eswar Prasad, former head of the IMF’s China division who’s now an economics professor at Cornell University. Still, Pan “has his work cut out for him given the many challenges the economy faces and the enormous economic and political constraints on the central bank,” Prasad said.
Pan exited the Communist Party’s elite Central Committee late last year, which some analysts at the time thought was a signal 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.
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Unlike the US Federal Reserve and central banks in Europe, the PBOC is not independent. 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 deputy governor, Pan was also head of the State Administration of Foreign Exchange since 2016, the regulator that oversees China’s US$3 trillion ($3.99 trillion) in foreign reserves. That experience may prove relevant as the PBOC seeks to stabilise the yuan amid heightened investor uncertainty. China’s currency is down almost 4% against the dollar this year, among the worst performers in Asia.
Top of Pan’s priorities will be steering the economy through its current downturn, which is weighing on financial markets and worrying businesses. Investors have been clamouring 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.
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. Pan is seen as more hawkish on property regulation, although the Communist Party’s Politburo on Monday signalled a shift in stance, hinting at likely easing in policies in coming months.
Meanwhile the standing committee, China’s top legislative body, also removed Qin Gang as foreign minister just seven months into the job on Tuesday. The diplomat, who mysteriously disappeared from public view in June, will be replaced by his predecessor Wang Yi, state media reported, without giving an explanation for the abrupt personnel change.
