China’s New Central Banker Once Fixed a Crisis. He May Need to Again.
For nearly eight years Pan Gongsheng has overseen one of the world’s biggest pots of money: China’s $3 trillion in foreign currency reserves. Now he will run the country’s central bank, playing an even more powerful role in the Chinese economy.
Mr. Pan, a prominent economist, was named on Tuesday as governor of the central bank, the People’s Bank of China. He had already been installed as the bank’s Communist Party secretary on July 1. It will be the first time in five years that one person will hold both top jobs, giving Mr. Pan outsize policy influence over the financial system of the world’s second largest economy.
The appointment of Mr. Pan comes at a delicate 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 teetering near the lowest levels in 15 years. These crosscurrents are making foreign investors think twice about putting money into China and nudging domestic ones to take their investments out of the country.
Foreign currency reserves are effectively a country’s emergency fund to be used at times of financial stress. As leader of the central bank’s State Administration of Foreign Exchange, Mr. Pan stabilized the renminbi after a devaluation, aimed at strengthening exports and increasing global use of the renminbi, backfired in August 2015.
He steadied the currency then by imposing strict limits, enforced by the police, on the ability of Chinese households and companies and even multinationals to move money out of the country. His actions stanched the outflow of capital but badly damaged the international appeal of the renminbi as an alternative to the dollar, and established a precedent for the planning now underway in Washington to limit American investments in China.
Earlier in his career he held top posts at two of the country’s four main banks, the Industrial and Commercial Bank of China and the 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 deflating with widespread harm to the economy.
Mr. Pan owes his ascent to “competence and a rare level of technical expertise, because he doesn’t appear to have any political backing from higher-ups,” said Andy Chen, a senior analyst at Trivium China, a Beijing policy consulting firm.
But Mr. Pan’s lack of a power base within the Communist Party may be offset by his commanding the top two spots at the central bank. Since 2018, the party secretary was Guo Shuqing, who was a full member of the party’s powerful Central Committee. The central bank governor has been Yi Gang.
Economic policy continues to be dominated by Vice Premier He Lifeng, who is a longtime ally and close friend of China’s top leader, Xi Jinping. Mr. He has overseen industrial policy and economic planning for the last seven years. This spring he was given added responsibility for international trade and finance, and he is expected to gain further clout over the domestic financial system as well.
Yet just surviving as a senior financial official in China these days is an accomplishment, as waves of corruption investigations have felled numerous leaders. Mr. Pan’s ability to avoid legal trouble while overseeing the currency reserves is particularly notable given the agency’s troubled history.
A director of the foreign currency agency in the 1990s, Zhu Xiaohua, was sentenced soon after to 15 years in prison for corruption during a subsequent posting as a bank executive, although he was later released on bail. Mr. Zhu’s successor, Li Fuxiang, was abruptly hospitalized in 2000 and died when he fell from a seventh-floor hospital window.
The foreign currency agency was thrown into turmoil again in 2015, when the central bank devalued China’s currency with scant initial explanation.
Beijing pushed down the value of its currency for technical reasons, and not because of financial distress. But the Shanghai stock market had crashed two months earlier and the devaluation so alarmed investors that China spent nearly $1 trillion in the ensuing months to stabilize the currency.
Mr. Pan halted the renminbi’s decline with stringent capital controls. He may be called on to act on the currency again in his new job. China’s Politburo on Monday endorsed a continued emphasis on preserving a stable value for the renminbi.
Mr. Pan’s stringent controls in 2016 on money flows out of China reversed more than a decade of efforts by Chinese policymakers to make the renminbi a globally traded currency that other central banks and big companies would want to hold.
But some financial policymakers say that Mr. Pan had little choice at the time, since restricting money from leaving China was part of a broader trend by Beijing of ever greater government controls on the economy.
“He was an administrator, a key one to be sure, administering policies from atop,” said Mark Sobel, who was the deputy assistant secretary of the United States Treasury for international monetary and financial policy from 2000 to 2015.
Mr. Pan does not come from an elite Communist Party family like Zhou Xiaochuan, who was the central bank’s governor and Communist Party secretary from 2002 to 2018. He also is not a former economics professor at an American university, like the governor for the past five years, Yi Gang. In fact, early in his career, Mr. Pan turned down an acceptance to attend Harvard’s Kennedy School of Government, staying instead in China and helping the two banks where he worked to prepare for their initial public offerings.
People who know Mr. Pan, who turned 60 earlier this month, describe him as a workaholic who is meticulously detail oriented. He is known to mark up memos from subordinates to correct their grammar.
He grew up in Anqing, a flood-prone town on the Yangtze River in central China’s Anhui Province. In the 1980s, he earned a bachelor’s degree in accounting at Zhejiang Metallurgical Economics College and taught there.
His career began picking up speed when he moved to Beijing in 1987 to earn a master’s degree in labor relations at Renmin University followed by a doctorate in economics and later a year at Cambridge University from 1997 to 1998.
And Harvard? He finally went there in 2011. But it was only for a couple months — not a degree program that might have deepened his understanding of the United States but would have kept him far from China’s center of power in Beijing.
Li You contributed research.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic. More about Keith Bradsher
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