Asia Unhedged got word this morning that at around 10:30 am EST a news story was seen posted on the Chinese website Netease (163.com) reporting that a major change was coming to the People’s Bank of China (PBOC) which would significantly elevate the organ’s policy-making authority. The story quickly disappeared, and we have been unable to corroborate the news.
What we were told, citing the phantom story, was that the central bank would become independent from the State Council, which currently holds authority over the PBOC’s decision-making.
While the fleeting glimpse of the potential development may have been erroneous, it does fit with the speculation that Xi Jinping’s close economic advisor Liu He will be chosen to replace current central bank chief Zhou Xiaochuan. Liu is at the center of speculation regarding upcoming appointments, seen as a top candidate to be in charge of the nation’s economic reforms. A position at the central bank, which would put him under the authority of the increasingly marginalized Premier Li Keqiang, seems unlikely unless the bank’s legal authority is changed to grant it independence from the State Council.
Nominations for top government positions, potentially including the PBOC governorship, were decided on during a three-day meeting of top Party leaders this week.
If Liu is given a position at a newly empowered PBOC, it would mark a change that gives Xi Jinping even more of mandate to push through coordinated reforms. There are a host of possibilities that the reformist Liu might have in mind, including supporting a renewed effort to internationalize the yuan. Indeed, analysts are saying that 2018 looks to be a big year for that effort.