China's cen­tral bank chief likely to quit

The Pak Banker - - Front Page -


China be­gan in­stalling a new eco­nomic lead­er­ship by in­di­cat­ing that cen­tral bank Gover­nor Zhou Xiaochuan will step aside and Vice Premier Wang Qis­han, the top fi­nance of­fi­cial, will move to a new role.

China be­gan in­stalling a new eco­nomic lead­er­ship by in­di­cat­ing that cen­tral bank Gover­nor Zhou Xiaochuan will step aside and Vice Premier Wang Qis­han, the top fi­nance of­fi­cial, will move to a new role.

Zhou, Com­merce Min­is­ter Chen Dem­ing and Fi­nance Min­is­ter Xie Xuren were ab­sent from the Com­mu­nist Party cen­tral com­mit­tee named yes­ter­day, sug­gest­ing they will prob­a­bly exit those jobs. The Polit­buro Stand­ing Com­mit­tee, the supreme de­ci­sion-mak­ing body in China that will be an­nounced to­day, is fore­cast to in­clude Vice Pres­i­dent Xi Jin­ping and Vice Premier Li Ke­qiang.

The com­po­si­tion of China's new lead­er­ship, de­cided in a once-a-decade tran­si­tion of power, may de­ter­mine the pace of change on is­sues such as dereg­u­lat­ing in­ter­est rates and break- ing up state mo­nop­o­lies. The make-up of the stand­ing com­mit­tee will pro­vide more ev­i­dence on pol­icy di­rec­tion as the world's sec­ond-big­gest econ­omy shows signs of re­bound­ing from a seven-quar­ter slow­down.

"One of the big­gest chal­lenges will be push­ing through re­forms in the fi­nan­cial sec­tor while keep­ing the banks sta­ble and not caus­ing too many prob­lems for state-owned en­ter­prises that rely on cheap bank credit," said Mark Wil­liams, a Lon­don- based econ­o­mist for Cap­i­tal Eco­nom­ics Ltd. and a for­mer ad­viser to the U.K. Trea­sury on China. "Dif­fer­ent con­stituen­cies are pulling the fi­nan­cial reg­u­la­tors and the cen­tral bank in dif­fer­ent direc­tions."Wang may head the party dis­ci­plinary body. Liu He, a se­nior gov­ern­ment eco­nomic ad­viser, joined the cen­tral com­mit­tee for the first time. Wil­liams sees Zhou step­ping down "fairly soon."

The bench­mark Shang­hai Composite In­dex fell 0.7 per­cent as of 9:42 a.m. lo­cal time, set to ex­tend this year's 6.6 per­cent de­cline. The yuan was lit­tle changed at 6.2276 against the dol­lar.

The 205 mem­bers of the cen­tral com­mit­tee, a body that in­cludes the gov­ern­ment's top lead­ers, gen­er­als of the Peo­ple's Lib­er­a­tion Army and heads of the big­gest state-owned en­ter­prises, were iden­ti­fied on state tele­vi­sion af­ter the party's 18th congress ended yes­ter­day in Bei­jing. Zhang Ping, head of the Na­tional De­vel­op­ment and Re­form Com­mis­sion, the top eco­nomic plan­ning agency, was ab­sent from the list. Lou Ji­wei, chair­man of China In­vest­ment Corp., be­came a full mem­ber in­stead of an al­ter­nate. Yes­ter­day's change may sig­nal the end of the of­fi­cial ca­reer of Zhou, 64, who helped pave the way for the yuan to rise 33 per­cent against the dol­lar start­ing in 2005 and over­saw a loos­en­ing of con­trols on lend­ing and de­posit rates this year. His suc­ces­sor will need to man­age the cur­rency and in­fla­tion to sup­port a growth re­bound while lack­ing the po­lit­i­cal in­de­pen­dence of coun­ter­parts such as U.S. Fed­eral Re­serve Chair­man Ben S. Ber­nanke.

At a Nov. 11 press briefing, Zhou didn't di­rectly an­swer a ques­tion on re­tire­ment. His ap­point­ment was an­nounced on Dec. 28, 2002, af­ter the 17th party congress the pre­vi­ous month.

Wang, 64, was ap­pointed to the Com­mu­nist Party's Cen­tral Com­mis­sion for Dis­ci­pline In­spec­tion, the of­fi­cial Xin­hua News Agency re­ported yes­ter­day. That sig­nals that Wang will take the top dis­ci­pline post on the stand­ing com­mit­tee, said Bo Zhiyue, se­nior re­search fel­low at the Na­tional Univer­sity of Sin­ga­pore's East Asia In­sti­tute. He would re­place He Guo­qiang.

"This is go­ing to be a huge waste of his strength in deal­ing with eco­nomic, fi­nan­cial mat­ters and for­eign af­fairs," Bo said. "He's a banker who's go­ing to be in charge of dis­ci­plinary af­fairs. It's a mis­match be­tween his true tal­ent and his as­sign­ment."

Wang, who jok­ingly calls him­self the un­cle of U.S. Trea­sury Sec­re­tary Ti­mothy F. Gei­th­ner and is a for­mer pres­i­dent of China Con­struc­tion Bank Corp. (939), helped lead China's re­sponse to the global fi­nan­cial cri­sis.

Yu Yongding, a for­mer aca­demic ad­viser to the Peo­ple's Bank of China, or PBOC, said Shang is the "most likely suc­ces­sor" and Guo would be "the best suc­ces­sor."

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