PBOC chief Zhou’s proteges poised to take reform baton

Bloomberg

As the retirement of People’s Bank of China Governor Zhou Xiaochuan nears, his legacy of financial reform may yet live on through the advancing careers of people he’s helped guide to prominence.
The latest examples of that phenomenon are five officials, associated with Zhou and seen as like-minded reformers, who were promoted since 2015 to key posts at the central bank, market regulators and even the International Monetary Fund. They include Zhang Xin, deputy head of the State Administration of Foreign Exchange and Li Bo, director general of the PBOC’s monetary policy department.
Their ascent should offer some reassurance amidst the uncertainty surrounding who’ll succeed the Group of 20’s longest-serving central bank governor. With proteges in key roles, Zhou can expect them to carry on his push for financial liberalisation and a freer yuan, while avoiding the pitfalls of a debt pile that’s swelled massively under his watch.
“These appointments at least partially reflect Zhou’s intention to ensure his legacy of liberal reform be maintained after he steps down,” said Feng Hui, co-author of ‘The Rise of the People’s Bank of China.’ “All the appointments help bring international visions to mid-level management.”
Greenspan Era
Since taking the central bank’s reins in December 2002—back when Alan Greenspan was leading the Federal Reserve—Zhou has steered the nation through global crises, overhauled monetary policy tools, ended a direct peg to the dollar, abolished a cap on deposit rates and overseen the elevation of the yuan to reserve-currency status.
While it’s widely expected he will retire in the not too distant future, there are no guarantees as China’s political appointments are often unpredictable.
Zhou bucked expectations he would leave back when he was 65. Instead he was promoted, taking on the title of vice
chairman of the Chinese People’s Political Consultative Conference, where the retirement age
typically is 70. Zhou turns 70
in January.
While the five men’s careers have intertwined with Zhou, there’s no way to know what hand the PBOC governor played in their recent promotions.
Xuan Changneng, the third member of the five, was promoted to assistant to the chairman at the China Securities Regulatory Commission in August last year. Like Zhang Xin, he returned from overseas to join Zhou when he led the securities watchdog in 2000.
Xuan “responded to the call of the then-CSRC chairman Zhou,” according to an article on the alumni association’s website of the University of Science and Technology of China, where Xuan studied as an undergraduate.
Zhang Tao, who began working with Zhou at the central bank in 2004, was promoted to serve as China’s voice at the International Monetary Fund in August last year. Lu Lei, who rubbed shoulders with Zhou when they both worked at the central bank in the mid-1990s, in June 2017 became a deputy head at SAFE, which manages China’s $3 trillion foreign exchange hoard.
Some of Zhou’s liberalisation goals have recently taken a back seat in the name of stability. Foreign exchange controls were tightened to stem an exodus of capital, and authorities have kept a tight rein on the yuan.

China money supply growth slips again
Bloomberg

Growth in China’s broad money supply slipped to a fresh record low, signaling authorities aren’t letting up in their drive to curb excess borrowing and safeguard the financial system.
Aggregate financing stood at $182.7 billion in July, the PBOC said, compared with an estimated 1 trillion yuan in a Bloomberg survey. New yuan loans stood at 825.5 billion yuan, versus an projected 800 billion yuan. Broad M2 money supply increased 9.2 percent.
Authorities pushing to cut excess leverage have squeezed the massive shadow bank sector, which shrank for the first time in nine months. Yet with aggregate financing remaining robust and bond issuance rebounding, the central bank is still providing ample support for businesses to avoid derailing growth ahead of a Communist Party congress this fall.