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Guo Shuqing named central bank's Party chief and vice-governor
GUO Shuqing, head of China's new regulator for the banking and insurance sectors, has been appointed the Communist Party chief and deputy governor of the People's Bank of China (PBOC), official publication Financial News reported on Monday.
As PBOC party chief, Mr Guo will exert the widest influence at one of the world's most powerful central banks, which unlike its peers in some countries is not fully independent. Its decision-making is broadly subject to the political influence of the Communist Party and the government.
Having the same person serve as both the PBOC's party chief and a deputy governor is unusual in China and has surprised economists and financial markets. As PBOC's party chief, Mr Guo outranks new PBOC governor Yi Gang politically, but as a vice-governor he is one step below him.
For 15 years, Zhou Xiaochuan, Mr Yi's mentor, had served as both PBOC's governor and party chief. Mr Guo himself is both chairman and party head of the newly established China Banking and Insurance Regulatory Commission (CBIRC).
Both men will support Liu He, China's new vice-premier and a key economic adviser and trusted ally to President Xi Jinping, to push the central government's development and reform agenda.
"Liu He is actually the one who outlined the big theme in terms of economic and financial policies. Both Guo and Yi will be implementing this economic policy outline," said Betty Wang, senior China economist at ANZ in Hong Kong.
Mr Guo's unique role will allow him to coordinate policymaking and implementation between PBOC and CBIRC, and help advance Beijing's financial reforms, sources said. As PBOC's party boss, he will ensure the central bank is aligned with the Communist Party's agenda, which puts the party at the core of China's economic leadership, sources said. Mr Guo is a full member of the Communist Party's Central Committee, the largest of the party's elite ruling bodies, while Mr Yi is an alternative member.
However, Mr Yi is still expected to be in charge of the PBOC's day-to-day operations, sources said.
Mr Yi, a US-educated economist, 21-year central bank veteran and previously Mr Zhou's right-hand man, will be able to ensure the consistency of monetary policy, sources said.
Simultaneously holding the positions of party boss and deputy ministerial head is not without precedent in China. Zhang Yesui is currently party chief of the foreign affairs ministry and a vice-foreign minister at the same time.
But the economy and the party have become more intertwined since a party congress in October when President Xi Jinping consolidated his grip on power. Party control is deemed necessary to help push reforms through a massive bureaucracy and into action on the ground.
The top-level arrangement of Mr Guo and Mr Yi's positions is expected to improve inter-agency coordination in China's monetary and financial policymaking process, and close regulatory loopholes as authorities work to contain systemic financial risks, sources said.
China's regulators are trying to rein in risks from an increasingly complex financial system and a rapid build-up in debt without jolting markets or hurting economic growth. The new leadership team is also facing pressure to follow through on China's long-standing pledge to further open its financial sector to foreign investors as the US steps up pressure on China for what it calls unfair trade practices.
President Xi has made it clear that financial security is key to China's national security, and control of financial risks is a top government priority.
Economists and regulators say the previous regulatory regime was too fragmented to curb such risks, especially shadow banking and excessive financial leverage. Speculation that Beijing was considering creating a super financial regulator had been rife since the Chinese stock market crash of 2015, blamed in part on poor inter-agency coordination.
Last year, China created the Financial Stability and Development Committee (FSDC) under the State Council, giving it a higher political ranking than the various government ministries already involved in financial oversight. REUTERS