China: Yi Gang to take over at the PBoC – Nomura

The National People’s Congress today appointed Mr. Yi Gang, the current vice governor of the People’s Bank of China (PBoC), as Governor Zhou Xiaochuan’s successor after 15 years in the role, points out the research team at Nomura.

Key Quotes

“Mr. Yi is a Western trained economist and believed to be a market-oriented reformer. His academic background and his long and varied experience in different positions at both the PBoC and State Foreign Exchange Administration (SAFE) makes him a technocrat, with, in our opinion, the ability to make professional and sound judgements on policy decisions.”

“Based on opinions expressed in his writing, we expect Mr. Yi to maintain a neutral monetary policy stance and thus essentially stable liquidity conditions. We also expect him to push the macro-prudential policy framework to avoid systemic financial risks and explore ways to include shadow banking activities and internet financing in the PBoC’s macro prudential assessment. To us, this suggests that financial deleveraging will be ongoing for years to come.”

“During his stint as chief of SAFE (2009-16), Mr. Yi was a member of the current account liberalisation camp, although in recent years his role at the PBoC required him to managed capital controls (since 2016, when RMB faced rising depreciation pressures and the risk of capital flight). This demonstrated pragmatism means we would expect the new governor to treat capital account liberalisation realistically and cautiously while capital controls are likely to remain in place for some time yet.”