China Retains Central Bank Governor During Regulatory Shake-Up

SINGAPORE—China’s legislature voted Sunday to retain Yi Gang as governor of the central bank, the People’s Bank of China, delaying a move to hand over the post in the midst of a broader restructuring of the financial regulatory system.
The reappointment of Mr. Yi, 65 years old, comes as Chinese leader Xi Jinping overhauls the country’s financial bodies, taking away some functions from the central bank.
Mr. Yi is expected to extend his leadership of the central bank for a few months to provide continuity during a period of transition, according to people familiar with the matter, though they said that the timing could be adjusted depending on the smoothness of the changeover.
Zhu Hexin, chairman of the financial conglomerate Citic Group Corp., has been considered the leading candidate to succeed Mr. Yi at the PBOC, The Wall Street Journal has reported. Mr. Zhu is still seen as the top candidate to succeed Mr. Yi when the transition is complete, the people familiar with the matter said.
The People’s Bank of China and the country’s State Council Information Office, which handles inquiries for the government, didn’t immediately respond to requests for comment on Sunday.
The government recently announced plans to create a new financial regulator, which will be formed from China’s existing banking and insurance regulatory commission and absorb some functions from other agencies, such as the central bank’s oversight powers of financial holding companies.
The financial regulatory overhaul, signed off on by Mr. Xi last month and formally approved by lawmakers on Friday, will create a new financial regulatory body known as the State Administration of Financial Supervision and Administration, as well as a national data bureau.
In parallel with the new financial regulator, China’s ruling Communist Party is planning to resurrect its Central Financial Work Commission, a policy-setting body that existed between 1998 and 2003, the Journal has reported. This commission would be the party counterpart to the new regulator, largely staffed with the same personnel performing both party and government duties.
Mr. Yi was appointed governor of the central bank in 2018 and has been a strong advocate for financial liberalization, supporting the opening up of China’s financial markets and the integration of the Chinese yuan into the global financial system. He has pushed for financial changes that would help curb debt and financial risks in the country.
His extensive experience in the financial sector, including service as a vice governor of the central bank for more than a decade, has earned him the respect of his peers in China and abroad. Still, the PBOC has lost much of its already-constrained independence under Mr. Yi as Mr. Xi tightened political control over financial affairs.
The role of PBOC governor was weakened during Mr. Yi’s stint. He took the post without becoming the central bank’s party chief, a more powerful role that went to another official. Unlike his predecessor, who was a full member of the party’s elite Central Committee, Mr. Yi was a nonvoting alternate member, a rank that Mr. Zhu currently holds.
The decision to retain Mr. Yi as central-bank governor suggests that Beijing wants the restructuring of the financial sector to be as smooth as possible, especially after heavy state intervention over the past year that dented global investor confidence in China’s future.
“The government sent a positive signal to the market by keeping these senior financial experts in the cabinet,” said Zhiwei Zhang, chief economist at Hong Kong-based Pinpoint Asset Management. “Continuity and stability in the leadership of economic and financial affairs are helpful to boost market confidence.”
China’s economic growth has slowed in recent years, and the government has implemented a range of measures to support economic growth and promote financial stability.
Separately on Sunday, the legislature approved a new cabinet for China’s new premier, Li Qiang, who picked Zheng Shanjie as head of China’s top economic planning body, the National Development and Reform Commission. Mr. Zheng is a native of Fujian, the southeastern province where Mr. Xi established himself early in his career.
Liu Kun, 66, retained his position as China’s finance minister. Gen. Li Shangfu, an aerospace engineer and member of the Central Military Commission, was appointed as the new defense minister.

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