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ISSN 2816-1971

  • Chung-min Tsai

A New Hand on the Purse Strings: A New Governor of the PBOC and China's Economic Policy

An unexpected appointment of a new Governor of the People's Bank of China, the country's central bank, sheds further light on the internal policies and outlook of the country's economy.

Photo credits: AFP

The former Deputy Governor of the People's Bank of China (PBOC), Pan Gongsheng, started his new role as Governor on July 25, marking an unexpected change in leadership. This surprising personnel shift holds three noteworthy implications: the lack of talent resulting in the need for Pan's appointment, the dissolution of the dual leadership system, and China’s evolving financial policy perspective.

To begin with, Pan had been serving as the Deputy Governor of the PBOC since 2012 and assumed the position of Chief of the State Administration of Foreign Exchange in 2016. During the 19th National Party Congress in 2017, he was elected as an alternate member of the Central Committee, signaling his potential succession to former Governor Yi Gang. However, Pan's absence from the membership or alternate membership lists in the 20th National Party Congress of October 2022 led to suggestions that he might retire the following year due to the age restrictions for deputy-ministerial level officials. Born in July 1963, he will turn 60 in July 2023.

Therefore, his appointment as Communist Party Secretary of the PBOC in early July and subsequently as governor in late July came as a surprise. Until June, Pan did not seem to be in contention for the PBOC governorship, especially considering Yi Gang's reappointment last October. It is believed that Pan garnered support from high-ranking financial officials, including Xi Jinping's economic advisor Liu He, former PBOC Governor Zhou Xiaochuan, and Yi Gang. Pan's appointment would appear to underscore the critical need for a technocratic leader with expert knowledge to address China's looming economic challenges and current issues. Holding a doctoral degree in economics from Renmin University of China and boasting extensive experience in the financial sector, Pan is well-equipped for this role.

Furthermore, it highlights a broader issue within Chinese leadership circles, particularly in the financial sector. There appears to be a lapse in the grooming of talented officials with expert knowledge, especially when considering Pan's exclusion from the central committee during the 20th National Party Congress in October. This omission may have been a result of the competitive nature of the election process, which saw 17 candidates lose. However, the result of Pan’s exclusion was that from the financial sector, only Yi Huiman, the Director of the State Securities Regulatory Commission, secured a seat on the Central Committee of the Chinese Communist Party. This is a notable decline compared to the 5 representatives in the 18th National Party Congress and the 2 in the 19th National Party Congress.

It is also worth noting that Pan had played a pivotal role in reforming the financial industry and had amassed a wealth of experience in this field. Given his qualifications and experience, it would have been entirely justifiable for him to have been elected to the central committee and appointed as the governor of the People's Bank of China in late 2022, rather than having to wait for over half a year for his appointment.

Secondly, a significant development is the abolition of the dual leadership system. This system, originally proposed by Deng Xiaoping in 1986, aimed to clarify the division of labor between the party and the government (dangzheng fenkai), rather than complete separation. Under this structure, the party leader focused on political affairs and strategic decisions, while the chief executive officer handled daily operational matters. This model had been widely adopted, particularly in central state-owned enterprises during the 2000s. In the financial sector, for instance, Guo Shuqing, the Director of the State Banking and Insurance Regulatory Commission, served as both the party secretary and vice governor of the PBOC. Meanwhile, the then-governor, Yi Gang, held the position of deputy party secretary starting in March 2018. This dual leadership system within the PBOC was initially established and supervised by then-Vice Prime Minister Liu He. It bore similarities to the roles of Chairman and Chief Executive Officer in large Western companies. Guo and Yi divided their responsibilities, with Guo primarily handling domestic issues while Yi coordinated with counterparts in other countries.

However, the appointment of Pan as both the party secretary and governor signifies the abandonment of the dual leadership system in favor of a return to the traditional approach of uniting the party and government (dangzheng heyi). This shift may be attributed to China's experiences with economic instability and systemic risks in recent years, during which the dual governance structure may have struggled to respond effectively. Additionally, Pan continues to hold the positions of director and party secretary of the State Administration of Foreign Exchange. As a result, he wields full authority over China's monetary policy, with oversight from Vice Prime Minister He Lifeng.

Lastly, Pan's appointment underscores China’s commitment to maintaining financial stability and policy continuity in the face of both external and internal pressures. His extensive professional knowledge, rich experience in commercial banking, and long-term engagement in international cooperation are valuable assets that will enhance interactions between the People's Bank of China and its counterparts in other countries. The PBOC, under Pan's leadership, is expected to promote an expansionary monetary policy, intervene as needed to stabilize the foreign exchange value of the renminbi, actively participate in global financial governance efforts, and coordinate effectively with other nations.

Nonetheless, it's important to note that Pan's influence in the policy-making process remains uncertain due to his non-membership in the central committee of the Chinese Communist Party. The apex of authority in the financial sector lies with the newly established Central Financial Commission (CFC) and the reestablished Central Financial Work Commission (CFWC). While the specifics of the personnel arrangements have not been officially disclosed by the Chinese state, it appears that He Lifeng holds the authority over economic and financial policymaking. Although Pan is likely to become a member of the CFC and CFWC, his role in shaping policy may be limited. The PBOC is expected to primarily implement policies formulated by the top leaders, highlighting the centralized nature of China's policy-making process in the financial sector.

In summary, Pan's appointment as the governor of the People's Bank of China in July wasn't entirely unexpected, given his previous status as a potential successor to Yi Gang. However, his failure to join the central committee may have been an unexpected outcome rather than a pre-arranged plan. With his dual roles as governor and party secretary, Pan now wields increased authority within the PBOC, indicating a departure from the dual leadership system that has been in place for years but has struggled to address recent financial sector challenges. In terms of policy outlook, Pan’s appointment implies that the focus is likely to remain on continuity and stability. The financial authority will likely prioritize efforts to mitigate systemic risks and ensure steady progress in the face of an uncertain economic recovery.


Chung-min Tsai is Professor of Political Science at the Department of Political Science at National Chengchi University, Taipei, Taiwan, and Executive Director of Academic Affairs at the Taipei School of Economics and Political Science at National Tsing Hua University, Hsingchu, Taiwan.



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