In response to the challenges of reviving flagging growth in the world's second-largest economy, China has appointed Economist Pan Gongsheng as the new head of the central bank. The decision, made by Chinese legislators during a meeting on Tuesday, marks the replacement of outgoing central bank governor Yi Gang, who has reached retirement age. Yi had been at the helm of the People's Bank of China (PBOC) since 2018.
Pan Gongsheng is no stranger to the financial realm, having previously served as the head of China's foreign exchange regulator since 2016, a time when the country faced significant capital flight. Furthermore, Pan has been a vice-governor at the central bank since 2012. His impressive credentials include education at renowned universities such as Cambridge in the United Kingdom and Harvard in the United States, contributing to his deep understanding of Chinese banking and politics.
Notably, Pan Gongsheng's appointment as the PBOC's Communist Party secretary on July 1 has further solidified his position. Analysts at Beijing-based consultancy Trivium praise Pan's political acumen and problem-solving skills, which have earned him a favorable reputation.
Pan's appointment comes amidst a challenging economic backdrop, prompting the central bank to implement several interest rate cuts in recent weeks as a means to reinvigorate growth. However, despite these efforts, the economy's performance in the second quarter fell short of expectations, with a growth rate of 6.3 percent compared to the predicted 7.1 percent.
Quarter-on-quarter data, considered a more realistic comparison basis, reveals growth of only 0.8 percent, significantly lower than the 2.2 percent recorded in the January-March period after the easing of Covid restrictions. Additionally, the concerning rise in youth unemployment to a record 21.3 percent in June further adds to the challenges faced by the Chinese economy.
Neil Thomas, a China specialist at the Asia Society, points out that Pan Gongsheng is a financial technocrat rather than a Xi loyalist, suggesting that President Xi is particularly concerned about the state of the economy. This concern became evident after the 20th Party Congress last year, where China's top leadership confirmed a third term in power for Xi.
China's Politburo acknowledged the existence of "new difficulties and challenges" on Monday, underscoring the urgency for officials to introduce stronger support measures. With Pan Gongsheng taking the reins of the central bank, all eyes are now on the new leadership to steer the economy toward a more robust trajectory.
