China’s reform agenda to continue, new appointments suggest

China looks set to continue on its course of economic reform and increasing influence in global trade following key political appointments this week.

In a break from tradition, the foreign-educated economist Yi Gang was nominated as the new governor of China’s Central Bank during the National People’s Congress in Beijing on Monday – an elevation from his role as deputy governor of the bank.

Although Mr Yi, who was educated in the US and taught economics at Indiana University, has been the deputy governor since 2008 and oversaw daily operations at the bank for two years, there is a tacit rule that a person with international career experience should not be appointed as the head of a key government division.

This break with tradition not only highlights the Party’s support of Mr Yi’s reforms but also China’s desire to have greater financial influence, according to The South China Morning Post, which reports that ‘the appointment sent a strong signal that Beijing wanted to see China taking a bigger role in global finance.’

Also elevated in the Congress this week was President Xi Jinping’s main economic advisor, Liu He, who was named one of four new Vice Premiers.

Mr Liu is known to be the architect of China’s financial and economic reforms, driving supply-side policies such as cutting overcapacity in steel and coal, and excess housing stock, The Straits Times reports.

Together these men have been the main drivers of Chinese reform in the past few years.

Liu He has driven recent economic and financial reforms, while Yi Gang has pushed for the opening-up of the Chinese market and liberalising the exchange rate regime. Analysts expect them to continue pushing the reformist agenda. These appointments emphasise the Chinese Communist Party’s continued support for economic and financial reforms and indicate ongoing policy continuity. It also means there will likely be smooth implementation of already-planned reforms.

Not only will economic and market shifts continue, but officials are determined to tighten financial regulation. The Chinese government has outlined regulation improvement as a major priority, as state-media outlet Xinhua reported in January.

Among the government’s top priorities for the next three years are reducing debt levels, preventing housing bubbles and eliminating shadow banking. Mr Yi’s appointment is a clear reflection of this aim, suggests The Financial Times, which reports that his promotion comes ‘as Beijing moves aggressively to control risk in its financial system.’ China has increased centralised control of the effort to curb financial irregularities. In a recent government reorganisation, the banking and insurance regulatory bodies were merged and the Central Bank given heightened macro-prudential policy power.

The appointments indicate that China’s ongoing reform efforts and increasing desire to have a role in global financial regimes will continue despite the actions of the US,  which has introduced protectionist tariffs which threaten the current trade order.