For nearly eight years, Pan Gongsheng has overseen one of the largest money funds in the world: China’s $3 trillion in foreign exchange reserves. Now he will run the country’s central bank, and play a more powerful role in the Chinese economy.
Mr. Ban, a prominent economist, was appointed on Tuesday as governor of the central bank, the People’s Bank of China. He had already been appointed as the bank’s Communist Party secretary on July 1st. It will be the first time in five years that someone has held two big jobs, giving Mr. Ban huge political leverage over the financial system of the world’s second-largest economy.
It is set at a precise time for China. The country’s post-pandemic recovery is faltering, its banking system is bloated with bad loans to real estate developers and local governments, and its currency, the renminbi, is hovering near 15-year lows. years. These cross currents make foreign investors think twice before investing money in China and push domestic investors to take their investments out of the country.
Foreign currency reserves are effectively an emergency fund of the country which is used in times of financial stress. As the leader of the State Administration of Foreign Exchange of the Central Bank, Mr. Pan’s work to stabilize the renminbi after devaluation, aiming to boost exports and increase global use of the renminbi, backfired in August 2015.
He stabilized the currency at the time by imposing severe restrictions, enforced by the police, on the ability of Chinese households, businesses, and even multinational corporations to move money out of the country. His actions halted capital outflows, but severely damaged the international appeal of the renminbi as an alternative to the dollar, and set a precedent for the planning now under way in Washington to curtail US investment in China.
Earlier in his career, he held senior positions at two of the country’s four major banks, Industrial and Commercial Bank of China and Agricultural Bank of China, and streamlined operations at both.
Mr. Pan was among the officials who warned early on of the dangers posed by China’s real estate bubble, which is now deflation with widespread damage to the economy.
Mr. Ban owes his rise to “competence and a rare level of technical expertise, because he doesn’t appear to have any political support from senior officials,” said Andy Chen, a senior analyst at Trivium China, a policy consultancy in Beijing.
But Mr Ban’s lack of a power base within the Communist Party may be offset by his leadership of the two highest positions in the central bank. Since 2018, the Party Secretary has been Guo Shuqing, who has been a full member of the powerful Party Central Committee. It was the governor of the central bank, Yi Gang.
Economic policy remains under the control of Vice Premier He Lifeng, a longtime ally and close friend of China’s supreme leader, Xi Jinping. He has overseen industrial policy and economic planning for the past seven years. This spring, he was given additional responsibility for international trade and finance, and is expected to gain more influence over the domestic financial system as well.
Still, just surviving as a top financial official in China these days is an achievement, as waves of corruption investigations have brought down many leaders. Mr. Ban’s ability to avoid legal trouble while overseeing currency reserves is particularly noteworthy given the agency’s turbulent history.
Foreign exchange agency director in the 1990s, Zhu Xiaohua was soon after sentenced to 15 years in prison for corruption while later appointed as the bank’s executive director, although he was later released on bail. Mr. Zhu’s successor, Li Fuxiang, was suddenly hospitalized in 2000 and died when he fell from a hospital window on the seventh floor.
The foreign exchange agency was thrown into turmoil again in 2015 when the central bank devalued China’s currency with little initial explanation.
Beijing devalued its currency for technical reasons, not financial hardship. But the stock market in Shanghai collapsed two months ago, and the devaluation so alarmed investors that China spent nearly $1 trillion in the following months to stabilize the currency.
Mr. Ban halted the renminbi’s decline with strict capital controls. He may be called to coin again at his new job. China’s Politburo on Monday endorsed continued focus on maintaining a stable value of the renminbi.
Ban’s strict controls in 2016 on money flows from China reversed more than a decade of efforts by Chinese policymakers to make the renminbi a globally traded currency that central banks and big corporations wanted to hold.
But some fiscal policymakers say Mr Ban had little choice at the time, because restricting money from leaving China was part of a broader push by Beijing for ever greater government controls over the economy.
“He was managerial, certainly a key manager, directing policies from the top,” said Mark Sobel, who was the US Treasury’s deputy assistant secretary for international monetary and financial policy from 2000 to 2015.
Mr. Pan does not belong to the Communist Party’s elite family like Zhou Xiaochuan, who was central bank governor and Communist Party secretary from 2002 to 2018. Nor is he a former professor of economics at an American university, like Mr. Yi, who has been conservative for the past five years. Indeed, early in his career, Mr. Pan refused admission to Harvard’s Kennedy School of Government, remaining in China instead and helping the two banks where he worked prepare for their initial public offerings.
People who know Mr. Ban, who turns 60 this month, describe him as a meticulously detail-oriented workaholic. He is known to mark up memos from subordinates to correct their grammar.
He grew up in the flood-prone city of Anqing on the Yangtze River in central China’s Anhui Province. In the 1980s, he obtained a bachelor’s degree in accounting from Zhejiang Metallurgical Economics College and taught there.
His career began to accelerate when he moved to Beijing in 1987 to obtain a master’s degree in labor relations from Renmin University followed by a PhD in economics and a year later at Cambridge University from 1997 to 1998.
And Harvard? He finally went there in 2011. But that was only for two months—not a degree program that might have deepened his understanding of the United States but would have kept him away from China’s power center in Beijing.
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