Runners and Riders for the PBOC Top Spot

Euromoney, November 13 2017

It’s all change in the world’s most powerful central banks: the Federal Reserve has a new chair coming; the Bank of Japan will need a new one from April; and, no less significant, China could announce the next head of the People’s Bank of China (PBoC) any day.

Incumbent governor Zhou Xiaochuan has openly stated he will retire soon, and Euromoney understands that the shortlist consists of four names – none of them widely admired deputy governor Pan Gongsheng. Instead, these are the four:

Guo Shuqing

Guo is considered top of the list. Guo is the chairman of the China Banking Regulatory Commission (CBRC), and is the front-runner partly because of the importance of that position and partly because of the combination of financial and political experience that has preceded it. He was chairman of China Construction Bank from 2005 to 2011, has served as the head of the China Securities Regulatory Commission (CSRC) and was governor of province Shandong from 2013 to 2017. Further back on the CV, he has also served as CEO of Central Huijin Investment, which is the part of the China Investment Corporation sovereign wealth fund that includes holdings in domestic banks. If that’s not enough, he has also run the State Administration of Foreign Exchange.

Observers think he would be a good choice. He couldn’t have more experience if he tried, and better still, he is considered to have achieved results. He is reform-minded, but not afraid of a crack-down – he is believed to be the one who tightened the net around Anbang Insurance (by asking all banks to report on their exposure to it) and is considered instrumental in China’s reining in of extravagant overseas acquisitions.

He speaks good English, would be a popular choice with the international central bank governors and finance ministers he would be dealing with, and he is also considered a close match to Zhou in terms of policy and belief in the markets.

Jiang Chaoliang

Jiang is considered the second-most likely candidate. He has, if anything, more political and social power than Guo: he has served as the governor of Jilin province and is now the Communist Party Secretary of Hubei province. He doesn’t have the same regulatory experience, but has worked at the highest levels of banking both at a commercial bank (Agricultural Bank of China, chairman from 2012, and Bank of Communications, chairman at a crucial point of its development that included its Hong Kong IPO and partnership with HSBC) and a policy bank (China Development Bank, where he was president and vice-chairman from 2008 to 2012). Much earlier in his career, he has also run branches of the PBoC, in Shenzhen and Guangzhou.

The second of these coincided with the bankruptcy of Guangdong International Trust and Investment Corporation, a $5 billion collapse; his experience in facing that crisis is still considered relevant today, particularly since the person he worked most closely with on it – the then vice-governor of Guangdong, Wang Qishan – has risen dramatically through the ranks and now leads China’s anti-corruption division.

Crucially, he is considered a rising star by president Xi Jinping, who is personally believed to have promoted him to positions three times. Against him, Guo speaks far better English and would be more readily welcomed by the world community.

Liu Shiyu

Liu is not short of things to do. He only became chairman of the CSRC last year, and one thing that counts against him for the PBoC job is the sense that there is more to do in his current portfolio – though one could say the same for Guo at CBRC.

He’s certainly made an impression, full of statements about barbarians in the markets; he’s also the one who finally put through approval for HSBC’s majority-owned securities JV, and presumably the one who will have final say on the new regulations allowing other foreign banks to take majority control of their ventures.

In Liu’s favour is his 10-year tenure at the PBoC from 1996 to 2006, rising to deputy governor. He also has commercial banking experience, having served as president of the Agricultural Bank of China, and, much earlier in his career, having worked in the banking supervision department of China Construction Bank.

Yi Gang

Yi is best known to the world as head of the State Administration of Foreign Exchange (SAFE) from 2009 to 2016, a crucial time in that institution’s history. He presided over the current high-water mark for FX reserves anywhere in the world (2014, just under $4 trillion) and also a series of liberalization measures for the use of the renminbi overseas. Before his time at SAFE, he, like Liu, spent a decade at PBoC and also rose to deputy governor.
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