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New old guard

15 November 2012 By Wei Gu

China’s leadership reshuffle extends to its financial sector. The country’s central bank chief may step down after being left out of the Party’s central committee. The heads of the China’s sovereign wealth fund and Bank of China’s chairman are among the candidates for promotion. Although the state maintains a tight grip on financial matters, personal styles still matter.

The most high-profile change is at the People’s Bank of China where Zhou Xiaochuan, governor for the past decade, is now expected to retire. That’s prompted speculation about his replacement. Xiao Gang, chairman of Bank of China, who was promoted to the 205-member central committee, should advance. A former deputy governor, who is also young enough to serve a full ten-year term, Xiao may have a chance of succeeding Zhou. But the heads of China’s banking and securities regulators, who are more senior, could also get the nod.

Other candidates for promotion include Lou Jiwei, chairman of China’s sovereign wealth fund, who could become finance minister. A former deputy finance minister, Lou’s international experience should come in handy as China becomes increasingly integrated into the global financial system.

Picking a new central banker in China is not as momentous as, say, selecting a new chief for the U.S. Federal Reserve. Monetary policy is still  believed to be set behind the scenes by the country’s premier or its State Council. Running the central bank may be more about following the party line, as Zhou showed last month when he cancelled a high-profile speech in Japan following a territorial dispute. Moreover, the likely new heads aren’t much different from the ones they are replacing. Most of them, including Lou and Xiao, earned their promotions in the era of former premier Zhu Rongji.

Still, personality matters in China’s hierarchy-driven society. Under Zhou, the PBOC has developed a more open culture with lively debates. Although it may not have the final say on interest rates, it can lead key initiatives, such as yuan internationalisation, which helped to loosen the country’s rigid control on the exchange rate. China’s new financial guard won’t automatically lead to faster reforms. But at least they have plenty of experience in pushing for changes from within.


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