Xi Jinping will keep China’s central bank chief, boosting markets

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

The reappointments, which analysts say will reassure markets about Beijing’s plans to reform the financial sector, were among the senior posts announced at the National People’s Congress on Sunday.

In addition to the central bank governor, among the most important was the nomination of Xi’s top aide, He Lifeng, the former head of the planning agency, to the post of deputy prime minister.

He Lifeng is expected to take over China’s economic team from Liu He, the Harvard-educated politician who 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 recent years as Xi has carried out comprehensive reforms of the country’s financial regulators and the Ministry of Science and Technology.

The Chinese president, entering an unprecedented third five-year term, is trying to revive China’s humiliating economic growth as it prepares to compete more with the United States in advanced technology.

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

Analysts say keeping Yi, a respected technocrat, would send a positive signal to markets as Beijing prepares to hand over some central bank regulatory functions to the state Financial Regulatory Commission, a new financial watchdog that replaces the current banking and insurance regulator.

“The institutional reforms suggest that the PBoC is clearly coming under tighter government oversight,” said Christopher Beddor, deputy director of China research at Gavekal Dragonomics. “There was a bit of concern in the markets about what this might mean. By opting for continuity, at least for the time being, it is a small confidence-boosting measure for the markets.”

Dong Ximiao, senior researcher at Shenzhen-based Merchants Union Consumer Finance, said keeping Yi at least temporarily would help stabilize the central bank’s monetary policy.

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

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

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

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

The nominations of China’s top officials were announced at the Great Hall of the People in Beijing in front of thousands of NPC delegates who applauded enthusiastically as Xi voted on the appointments.

Sunday’s appointments did not include party chiefs of ministries or regulatory agencies. In the Chinese system, party bosses often wield more power over crucial decisions than those in official government positions.

For example, the post of Communist Party leader of the PBoC has not yet been announced.

Appointments to head several powerful new bodies approved by parliament last week have also not been announced, signaling a further shake-up of the leadership team after the annual meeting.

In addition to the new financial regulator, these include a national data office that oversees the country’s data strategy.

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

On Saturday, the NPC confirmed that it had appointed a close Xi ally, Li Qiang, a former party chief in Shanghai, as the president’s number two. As prime minister and head of the State Council, Li’s main task will be to revive an economy battered by Covid controls and cuts to the tech industry.

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

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

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

Additional reporting by Ryan McMorrow and Nian Liu in Beijing