China Retains Yi as Central Bank Governor in Surprise Move

China retained several of its top economic officials, including central bank Governor Yi Gang, in a surprise move as it looks to navigate the post-Covid recovery.
China Retains Yi as Central Bank Governor in Surprise Move
China Retains Yi as Central Bank Governor in Surprise Move

China retained several of its top economic officials in a surprise move that points to policy stability, as Beijing looks to boost investor confidence and steer the nation’s post-Covid recovery.

Yi Gang, 65, will remain as governor of the People’s Bank of China, while Liu Kun and Wang Wentao will also stay on as finance and commerce ministers, respectively. The National People’s Congress — the annual parliamentary gathering — approved the appointments on Sunday.

He Lifeng, 68, a long-time associate of President Xi Jinping and former head of the nation’s economic planning agency, was named vice premier — a post widely expected to put him in charge of economic policy. He’ll be replaced at the National Development and Reform Commission by Zheng Shanjie, previously the top official in Anhui province. 

Ding Xuexiang, Xi’s chief of staff, was also named vice premier, though his exact responsibility is unknown yet. China also appointed a new defense minister, Li Shangfu, a general who has been sanctioned by the US.  

PBOC Governor Yi was expected to step down, having reached the retirement age for ministers and after being left off a list of top ruling party officials last year. On Saturday, Yi was appointed a member of the standing committee of the Chinese People’s Political Consultative Conference, a top political body, enabling him to remain in his post despite hitting the official retirement age. 

“This is a pragmatic choice, as the new leaders need professional experts to handle the complicated economic and financial challenges,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. “The leaders understand the top priority is to boost confidence. This decision is one step in that direction.”

The unexpected move to retain key economic officials comes against the backdrop of an uncertain growth outlook as China gradually recovers from three years of pandemic turmoil and an ongoing property market slump. While there are recent signs of a rapid pickup in consumer spending after the country dropped Covid restrictions at the end of 2022, global growth has weakened and exports continue to shrink. 

‘Interim Arrangement’

Hui Feng, co-author of “The Rise of the People’s Bank of China” and a senior lecturer at Griffith University, said it’s possible Yi may not serve out a full five years in the post. It could be an “interim arrangement” before a more suitable candidate becomes available for the top job at the central bank, he said.

The move “suggests that the leadership is not confident with the other rumored candidates at a time when stability is priority,” said Feng. The PBOC is facing some dire challenges including rising public debt and uncertainties in the global economy and geopolitics, he said.

The NPC didn’t name the head of the newly formed national financial regulatory administration, which will oversee all financial sectors except the securities industry. The new oversight body will take over some of the PBOC’s responsibility, such as regulation of financial holding companies and financial consumer protection. 

In his second term, Yi will be tasked with providing central bank support to steer the recovery while at the same time keeping inflation at bay, maintaining a stable yuan and preventing another buildup of debt in the economy. Stabilizing the property market — which the International Monetary Fund says is still in an unresolved crisis — will be another key challenge.

The PBOC under Yi has taken a moderate approach to monetary easing since the pandemic erupted in 2020, elevating the status of structural policy tools to help funnel credit into targeted sectors of the economy. During his first term, Yi has also pushed to reform the interest rate system and increase the flexibility of the yuan.

A US-trained economist and Beijing native, Yi is seen as a liberal technocrat with strong academic credentials. He was one of the first Chinese students sent to America after the two countries established diplomatic ties in the late 1970s, and taught economics at Indiana University for eight years before returning to China in 1994. 

He joined the PBOC in 1997, and held a series of roles including head of the monetary policy department, assistant to the central bank governor — Zhou Xiaochuan at the time — and head of the foreign exchange regulator, responsible for managing the country’s foreign reserves that peaked at $4 trillion.

As finance minister, Liu will need to tackle the mounting debt of local governments. A majority of regional authorities breached an official threshold that indicates disproportionately high debt risks. Government finances have deteriorated rapidly after years of Covid controls, tax cuts and a property slump.

--With assistance from , and .

(Updates with additional details.)

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