China: Yi’s appointment signals continuity, and more – Standard Chartered

According to analysts at Standard Chartered, financial reforms and opening are expected to continue under Governor Yi as PBoC gains power as Yi Gang’s close working relationship with Liu He bodes well for policy effectiveness, in their view.

Key Quotes

“A likely seamless transition to the PBoC’s new era

• Yi Gang has been appointed governor of the People’s Bank of China (PBoC). Yi has worked at the central bank since 1997, overseeing monetary and FX policies before becoming the first deputy governor, and being “responsible for basically everything at the PBoC”, to quote former Governor Zhou Xiaochuan. As such, Yi represents a safe pair of hands to continue China’s monetary and financial reform initiatives while causing the least market jitters, at a time when the PBoC has been given more responsibility within the financial regulatory framework.
• Yi has worked very closely with Liu He, President Xi’s top economic advisor, who has been confirmed as vice-premier in charge of economic and financial policy. In 2014, Yi became the deputy to Liu at the General Office of the Communist Party’s Central Leading Group for Financial and Economic Affairs. While Liu is expected to help set the general policy direction, we see Yi as more than just an executor of monetary policy. We believe Yi is well positioned to inform and influence policy making and although his political rank is not as high as Zhou’s, his role should not be underestimated.
• We see Yi’s appointment as an acknowledgment of his past performance and his vision for monetary policy and financial reforms. Yi has made it clear that a ‘clean float’ is China’s long-term exchange-rate policy objective, although he believes the transition must be incremental and prudent. He is open to introducing a Tobin tax to contain short-term speculative capital flows. He has said that deleveraging should be gradual, starting with a slowdown in the debt ratio, to ensure financial stability.”