Xi Jinping retains China central bank chief to boost markets

Xi Jinping has kept the country’s central bank governor, Yi Gang, in his post and retained his finance and trade ministers as the Chinese president defied expectations of a sweeping reshuffle of his cabinet at this year’s parliamentary session.

The reappointments, which analysts said would calm markets nervous about Beijing’s financial sector reform plans, were among a series of high-level appointments announced at Sunday’s National People’s Congress.

Aside from the central bank governor, the most notable included the appointment of a senior Xi official, He Lifeng, the former head of the planning agency, as vice premier.

He Lifeng is expected to take over the leadership of the China economics team from Liu He, the Harvard-educated politician who has helped steer the world’s second-largest economy through the turmoil of the past five years, including the Covid-19 pandemic.

This NPC meeting is seen as one of the most important in years as Xi pushes ahead with sweeping reforms of the country’s financial regulators and science and technology ministry.

The Chinese president, beginning an unprecedented third five-year term, is trying to revive China’s flagging economic growth while preparing for greater competition from the US in advanced technology.

Xi was to replace the head of the People’s Bank of China, who had reached the retirement age of 65 for government ministers, with a commercial banker.

Analysts said the retention of Yi, a respected technocrat, would send a positive signal to markets as Beijing prepares to transfer some of the central bank’s regulatory functions to the state financial regulator, a new financial regulator based on the current banking sector becomes insurance regulator.

“The institutional reforms indicate that the PBoC will clearly come under tighter government oversight,” said Christopher Beddor, deputy director of China research at Gavekal Dragonomics. “There have been some concerns in the markets as to what that could mean. By opting for continuity, at least for now, it is a certain confidence-inspiring measure for the markets.”

Dong Ximiao, chief researcher at Shenzhen-based Merchants Union Consumer Finance, said keeping Yi at least temporarily would help ensure the stability of central bank monetary policy.

Policy support for the real economy should remain strong, Dong said, and Yi will be in a better position to drive “implementation of institutional reforms” at the PBoC, which includes streamlining the central bank’s branch network.

Analysts warned that while Xi retained Yi and most of the other ministers and ministerial-level appointees at the NPC meeting, they could always be replaced later.

“The ministers of the State Council can be reappointed at any time,” said Chen Long, co-founder of Beijing-based research firm Plenum, referring to China’s cabinet.

Tan Yifei, founder of Jince Frontier, a Beijing-based consulting firm, said Yi’s reappointment appears to be “temporary” to ensure policy consistency. “Personnel changes can be made every two months at the meeting of the State Council Standing Committee,” Tan said, adding that more changes are likely in the coming months.

The nominations of China’s top officials were announced in Beijing’s vast Great Hall of the People before thousands of NPC delegates who applauded enthusiastically as Xi cast his vote on the appointments.

Sunday appointments did not include party heads of departments or regulators. In China’s system, party leaders often have more power over important decisions than those in official government positions.

The post of PBoC Communist Party leader, for example, has yet to be announced.

No appointments were also announced for those who will head several powerful new bodies approved by Parliament last week, suggesting there could be a further restructuring of the leadership team after the annual meeting.

In addition to the new financial regulator, this includes a national data bureau that oversees the country’s data strategy.

Among other appointments announced Sunday, Xi retained Wang Wentao as commerce minister and Liu Kun as finance minister, and appointed Zheng Shanjie to take over the powerful planning body, the National Development and Reform Commission.

On Saturday, the NPC confirmed Xi’s appointment of a close ally, Li Qiang, the former Shanghai Party leader, as the president’s number two. As prime minister and head of the State Council, Li’s main task will be to revitalize an economy battered by Covid controls and a crackdown by the tech industry.

Retaining Yi, Liu Kun and other competent technocrats would send a message that Li’s State Council is committed to openness to the outside world, said Henry Huiyao Wang, president of the Center for China and Globalization in Beijing.

These figures have been China’s main interlocutors at meetings like the G20. “The financial and banking sector has been one of the most important areas in opening up China,” Wang said.

Xi also retained Ma Xiaowei as minister of the National Health Commission, a critical post as China pursued its zero-Covid strategy last year.

Additional reporting from Ryan McMorrow and Nian Liu in Beijing