China is lining up a Harvard-trained economist as its next central bank chief

By Laura He and Martha Zhou, CNN

Hong Kong/Beijing (CNN) — China has named an economist who studied at Cambridge University and Harvard University to a key political post at its central bank that could position him to eventually replace governor Yi Gang.

Pan Gongsheng was appointed Saturday as the new Communist Party chief at the People’s Bank of China (PBOC), in a surprise move as Beijing bolsters its drive to arrest the country’s economic slowdown and stem a slide in its currency.

The announcement came just days before US Treasury Secretary Janet Yellen is expected to visit Beijing, and follows a series of downbeat economic data that has sent the yuan tumbling towards levels last seen 15 years ago.

Pan, who will turn 60 this week, is likely to be named governor of the PBOC following his promotion to the top party post at the bank, state-owned Securities Times reported, citing anonymous analysts.

If that happens, he will replace Yi, 65, who has been serving as the central bank’s governor for five years and is still in post.

CNN has reached out to the PBOC for comment, but didn’t immediately receive a response.

Pan currently serves as the deputy governor of the PBOC. He also holds a concurrent post as head of China’s foreign exchange regulator, managing the world’s largest foreign exchange reserves worth $3.18 trillion.

He replaced Guo Shuqing, who had been been the party boss at the central bank since 2018 and oversaw a regulatory crackdown on fintech conglomerates like Ant Group.

Neil Thomas, a fellow of Chinese Politics at Asia Society Policy Institute’s Center for China Analysis, described Pan’s elevation as a “shock,” as he wasn’t appointed to the Communist Party’s Central Committee, its top decision-making body, at the last congress in October.

In China’s political system, the Communist Party boss is usually the top official in the relevant organization, be it a level of government or a public institution. That person usually holds the ultimate decision making power on any major issue.

“My initial reaction is this suggests Xi [Jinping] is more concerned about China’s economy than before the 20th Party Congress,” Thomas said.

During the party congress last year, Xi secured a historic third term in power and stacked his top team with loyalists in a clean sweep not seen since the Mao Zedong era decades before.

A seasoned technocrat

Pan is a financial technocrat, not a Xi loyalist, Thomas said, which contributed to the surprise surrounding his promotion.

Following the party congress, China’s top leader strengthened the party’s control over the country’s economic institutions. Several of his loyalists had been tipped to take key positions running the economy, even though they are perceived to have little experience dealing with international financial organizations.

But as the country’s economic recovery began to lose steam in recent months, calls for more stimulus measures have intensified.

Top leaders eventually chose to promote Pan for his international background and expectations that he would have an easier time working with other central bank governors, the Wall Street Journal reported, citing anonymous sources.

Yellen will travel to Beijing later this week as part of ongoing efforts by the Biden administration to deepen communication between the United States and China, the Treasury Department announced Sunday evening.

A seasoned financial regulator with some training in the West, Pan received his doctorate in economics from the Renmin University of China in 1993. Since then, he has spent nearly two decades working at large state-owned banks, including the Industrial and Commercial Bank of China (ICBC) and the Agricultural Bank of China (ABC).

Pan was known in China’s financial world as the key person behind the stock market listings of ICBC and ABC in 2006 and 2010, which separately set records as the world’s largest IPOs at the time.

From 1997 to 1998, he was a visiting scholar at Cambridge University. In the first half of 2011, he studied at the Harvard University’s Kennedy School of Government.

After returning to China, he was promoted to deputy governor at the PBOC in 2012. Three years later, he added the role of party head of the State Administration of Foreign Exchange.

Pan was well regarded for voicing prescient concerns about China’s real estate bubble years before the sector took a dive in 2021.

“If citizens store their wealth by buying houses, it may cause the real estate bubble to burst or even [cause] an economic crisis,” he told an economic forum in June 2014.

He also repeatedly pledged to maintain the stability of the Chinese yuan, warning speculators against shorting the currency.

If Pan is also named PBOC governor, he would have the tough job of boosting the economy amid an uncertain global outlook, managing financial risks derived from a persistently weak housing market and preventing the yuan from sliding further.

Economic slowdown

China’s economy has taken a deep hit from three years of draconian Covid restrictions, which hammered consumer spending and disrupted factory production.

After Beijing ended its zero-Covid policy in December, the economy experienced an initial burst of activity, with GDP growing 4.5% in the first quarter from a year earlier. But momentum has since slowed.

On Monday, the Caixin/S&P Global manufacturing purchasing managers’ index (PMI), a private sector survey, dropped to 50.5 in June from 50.9 in May, below market expectations. The index is a key indicator of factory activity among smaller, private firms.

That came on the heels of the official government PMI released on Friday, which showed the manufacturing sector was still contracting. The non-manufacturing PMI, an indicator of activity in the services and construction sectors, dropped to its weakest level since December.

The Chinese currency has also declined rapidly.

The yuan hit its lowest level in seven months on Friday, taking its losses this year to 5%. The currency is now a touch away from the 15-year low seen in November, just after Xi consolidated power and before the removal of Covid restrictions.

On Saturday, the PBOC vowed to stabilize the yuan at “a reasonable and balanced level.”

“[We will] resolutely prevent the risk of sharp fluctations in the exchange rate,” it said in its quarterly monetary policy report.

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