China to overhaul financial system giving Xi more control

CHINESE President Xi Jinping is set to bring decision-making of the financial system further under his control with the likely revival of a powerful committee to coordinate financial policy and the possible appointment of a key ally in a top position at the central bank.

Authorities are considering reviving the long-disbanded Central Financial Work Commission to allow the ruling Communist Party to assert more control over financial policy, according to people familiar with the matter. Ding Xuexiang, Xi’s chief of staff, is set to become the head of the entity, one of the people said, asking not to be identified discussing a private matter.

He Lifeng – who is expected to replace Liu He as China’s vice premier responsible for economic policy in a government reshuffle next month – is also being considered for the role of party secretary at the People’s Bank of China, the Wall Street Journal reported.

The appointment and potential overhaul of China’s financial regulatory regime would put decision-making over key economic policies in fewer hands and centralise it under Xi, while also highlighting the strategic importance of China’s US$60 trillion financial sector. A vice premier holding a senior position at the PBOC would also elevate its role in financial regulation.

Xi has consolidated his power since taking control in 2012, stacking the party’s leadership with loyalists. He secured a precedent-breaking third term in power at the party’s congress in October last year.

“There’s no doubt that He Lifeng has a much, much closer personal relationship to Xi than” current PBOC party chief Guo Shuqing, said Christopher Beddor, deputy China research director at Gavekal Dragonomics. “If he’s ultimately appointed to replace Guo, markets will probably view that as Xi gaining somewhat more direct oversight of the central bank.”

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The appointments have yet to be finalised, and plenty could still shuffle around ahead of the National People’s Congress next month. It’s at that key political event that China’s top legislature confirms a slate of ministerial appointments, including the PBOC governor. No nominees have been formally announced. BLOOMBERG