For nearly eight years, Pan Gongsheng has overseen one of the world’s largest reserves: China’s $3 trillion foreign exchange reserves. He will now run the country’s central bank, playing an even more powerful role in the Chinese economy.
Mr Pan, a prominent economist, was named on Tuesday as governor of the central bank, the People’s Bank of China. He had already been installed as the Communist Party secretary of the bank on 1 July. It will be the first time in five years that the same person will hold both top positions, leaving Mr Pan with far more policy influence over the financial system of the world’s second-largest economy.
Mr. Pan’s appointment comes at a critical time for China. The country’s post-pandemic recovery is faltering, its banking system is bloated with bad loans from real estate developers and local governments and its currency, the renminbi, is nearing its lowest level of 15. Year. These crosscurrents are making foreign investors think twice about investing in China and prompting domestic investors to take their investments out of the country.
Foreign exchange reserves are effectively the country’s emergency fund to be used in times of financial stress. As leader of the central bank’s State Administration of Foreign Exchange, Mr. Pan stabilized the renminbi after a devaluation aimed at bolstering exports and increasing global use of the renminbi, which backfired in August 2015.
He kept the currency stable by imposing strict police-enforced limits on the ability of Chinese households and companies and even multinationals to move money out of the country. His actions stemmed capital outflows, but badly damaged the renminbi’s international appeal as an alternative to the dollar, and set a precedent for an ongoing plan in Washington to limit US investment in China.
Early in his career, he held top positions in the Industrial and Commercial Bank of China and the Agricultural Bank of China, two of the country’s four main banks, and streamlined operations in both.
Mr Pan was among the officials who warned early on about the dangers posed by China’s real estate bubble, which is now causing widespread damage to the economy.
Andy Chen, a senior analyst at Trivium China, a Beijing policy consulting firm, said Mr. Pan attributes his rise to “ability and a rare level of technical expertise, as he appears to have little to no political backing from higher officials.”
But what Mr. Pan lacks in power base within the Communist Party may be compensated by his command over the top two spots at the central bank. Since 2018, the party secretary has been Guo Shuqing, a full member of the party’s powerful Central Committee. The governor of the central bank has been Yi Gang.
Economic policy is dominated by Vice Premier He Lifeng, a longtime ally and close friend of China’s top leader, Xi Jinping. Shriman has been looking after the industrial policy and economic planning for the last seven years. This spring he was given additional responsibility for international trade and finance, and is expected to gain even more influence over the domestic financial system.
Yet surviving as a senior financial official in China these days is a feat in itself, as corruption investigations have befallen many politicians. Mr. Pan’s ability to avoid legal trouble while overseeing currency reserves is especially notable given the agency’s troubled history.
Zhu Xiaohua, a director of a foreign exchange agency in the 1990s, was sentenced to 15 years in prison for corruption during his posting as a bank executive, though he was later released on bail. Mr. Zhu’s successor, Li Fuxiang, was suddenly hospitalized in 2000 and died after falling from a seventh-floor hospital window.
The foreign exchange agency ran into turmoil again in 2015, when the central bank devalued China’s currency with little initial explanation.
Beijing devalued its currency for technical reasons, not because of a financial crisis. But the Shanghai stock market had collapsed two months earlier and the devaluation alarmed investors so much that China spent nearly $1 trillion in the following months to stabilize the currency.
Mr. Pan halted the renminbi’s decline with tighter capital controls. He may again be called to work on currency in his new job. China’s Politburo on Monday supported the continued emphasis on preserving the stable value of the renminbi.
Mr. Pan’s tight controls on money flows out of China in 2016 reversed more than a decade of efforts by Chinese policymakers to make the renminbi a globally traded currency that other central banks and big companies wanted to own.
But some financial policy makers say Mr Pan had little choice at the time, as restricting money from leaving China was part of a wider trend of greater government control of the economy by Beijing.
“He was an administrator, certainly a key figure, managing policies from the top,” said Mark Sobel, who was the United States Deputy Assistant Secretary of the Treasury for international monetary and financial policy from 2000 to 2015.
Mr Pan does not come from a distinguished Communist Party family like Zhou Xiaochuan, who was governor of the central bank and secretary of the Communist Party from 2002 to 2018. He is also not a former professor of economics at an American university, like Yi Gang, the governor for the past five years. In fact, early in his career, Mr. Pan declined an acceptance to attend Harvard’s Kennedy School of Government, instead staying in China and helping the two banks where he worked prepare for initial public offerings.
Those who know Mr Pan, who turned 60 earlier this month, describe him as a busy workaholic who is meticulously detail-oriented. He is known to mark his subordinates’ memos to correct their grammar.
He grew up in the flood-prone city of Anqing on the Yangtze River in central China’s Anhui province. In the 1980s, he earned a bachelor’s degree in accounting at the Zhejiang Metallurgical Economics College and taught there.
His career began to gain momentum when he moved to Beijing in 1987 to earn a master’s degree in labor relations at Renmin University, followed by a doctorate in economics, and later a year at Cambridge University from 1997 to 1998.
and Harvard? He finally went there in 2011. But it was only for a few months—not a degree program that could deepen his understanding of the United States but keep him away from China’s center of power in Beijing.
li yu Contributed to research.
