China’s readiness to bend retirement rules to keep arch-reformer Zhou Xiaochuan at the helm of the central bank signals clearly that new Communist Party chiefs want to speed economic reform in the country’s most critical development phase in three decades.
Central bank insiders interviewed by Reuters say the People’s Bank of China (PBOC) is the country’s most potent force for reform in the face of powerful vested interests, echoing sources with leadership ties who last week said Zhou would keep his job despite reaching the mandatory retirement age of 65.
Keeping Zhou ensures that the PBOC will remain a trusted instrument through which China’s leaders can enact financial reforms designed to boost free markets and private enterprise, rebalance the economy, reinvigorate growth and ultimately heal a socially divisive rift between the country’s rich and poor.
“Governor Zhou has been rather bold in spearheading market reforms and sometimes does not care about the possible repercussions,” said a PBOC official requesting anonymity due to the sensitivity of the matter. “They really need someone who can sustain the reform momentum.”
The reform agenda espoused by Party leaders Xi Jinping and Li Keqiang is not always popular with the local government officials, state-backed business and cosseted national lenders.
Liberalising interest rates, for example, would hit fat lending margins at state banks. Expanding capital markets would end subsidised access to funds for state-owned enterprises and cut private sector finance costs while creating investment options beyond real estate — cooling the property speculation that lays at the heart of local government corruption and debt risks.