For nearly eight years, Pan Gongsheng has overseen one of the world’s largest pots of money: China’s $3 trillion in foreign exchange reserves. Now he will manage the country’s central bank, and play an even stronger role in the Chinese economy.
Mr. Pan, a prominent economist, was appointed governor of the central bank, the People’s Bank of China, on Tuesday. He had already been installed as secretary of the bank’s Communist Party on 1 July. It will be the first time in five years that one person holds both top jobs, giving Mr. Pan overall political influence over the financial system in the world̵[ads1]7;s second-largest economy.
He was appointed at a delicate time for China. The country’s post-pandemic recovery is faltering, the banking system is bloated by bad loans to property developers and local governments, and the currency, the renminbi, is teetering near 15-year lows year. These cross-currents make foreign investors think twice about putting money into China and pressure domestic ones to take their investments out of the country.
Foreign exchange reserves are effectively a country’s emergency fund that can be used in times of economic stress. As head of the central bank’s State Administration of Foreign Exchange, Pan stabilized the renminbi after a devaluation aimed at boosting exports and increasing global use of the renminbi backfired in August 2015.
He then stabilized the currency by imposing strict limits, enforced by the police, on the ability of Chinese households and companies and even multinationals to move money out of the country. His actions halted the outflow of capital but damaged the international appeal of the renminbi as an alternative to the dollar, setting a precedent for the plotting now underway in Washington to limit US investment in China.
Earlier in his career, he held top positions in two of the country’s four main banks, the Industrial and Commercial Bank of China and the Agricultural Bank of China, and streamlined operations in both.
Mr. Pan was among the officials who early warned of the dangers of China’s property bubble, which is now deflating with widespread damage to the economy.
Mr. Pan owes his rise to “competence and a rare level of technical expertise, because he does not appear to have any political support from higher up,” said Andy Chen, senior analyst at Trivium China, a Beijing consultancy.
But Mr. Pan’s lack of a power base in the Communist Party may be offset by his command of the top two seats at the central bank. Since 2018, the party secretary was Guo Shuqing, who was a full member of the party’s powerful Central Committee. The head of the central bank has been Yi Gang.
Economic policy remains dominated by Vice Minister He Lifeng, who is a longtime ally and close friend of China’s Supreme Leader, Xi Jinping. Mr. Han has overseen industrial policy and economic planning for the past seven years. This spring he was given additional responsibility for international trade and finance, and he is expected to have further influence on the domestic financial system as well.
Still, just surviving as a senior financial official in China these days is a feat, as waves of corruption investigations have brought down many executives. Mr. Pan’s ability to avoid legal trouble while overseeing foreign exchange reserves is particularly remarkable given the agency’s troubled history.
A director of the foreign exchange bureau in the 1990s, Zhu Xiaohua was shortly afterwards sentenced to 15 years in prison for corruption during a subsequent post as bank chief, although he was later released on bail. Mr. Zhu’s successor, Li Fuxiang, was suddenly hospitalized in 2000 and died when he fell from a seventh-floor hospital window.
The currency bureau was thrown into turmoil again in 2015 when the central bank devalued China’s currency with scant initial explanations.
Beijing pushed down the value of its currency for technical reasons, and not because of economic distress. But the Shanghai stock market had crashed two months earlier, and the devaluation spooked 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 strict capital controls. He may be asked to trade the currency again in his new job. China’s Politburo supported on Monday a continued emphasis on preserving a stable value for the renminbi.
Mr. Pan’s strict controls in 2016 on money flows out of China reversed more than a decade of efforts by Chinese politicians to turn the renminbi into a globally traded currency that other central banks and big companies want to hold.
But some fiscal policymakers say Mr. Pan had little choice at the time, as restricting money from leaving China was part of a broader trend from Beijing of increasing government control over the economy.
“He was an administrator, a key one to be sure, and administered policy from the top,” said Mark Sobel, who was the US Treasury Department’s deputy assistant secretary for international monetary and fiscal policy from 2000 to 2015.
Mr. Pan does not come from an elite Communist Party family like Zhou Xiaochuan, who was central bank governor and Communist Party secretary from 2002 to 2018. Nor is he a former economics professor at an American university, like Mr. Yi, the governor for the past five years. In fact, early in his career, Mr. Pan turned down an acceptance to attend Harvard’s Kennedy School of Government, and instead stayed in China, helping the two banks where he worked prepare for their initial public offerings.
People who know Mr. Pan, who turned 60 this month, describe him as a workaholic who is meticulously detail-oriented. He is known to mark notes from subordinates to correct their grammar.
He grew up in Anqing, a flood-prone city on the Yangtze River in central China’s Anhui Province. In the 1980s, he earned a bachelor’s degree in accounting at Zhejiang Metallurgical Economics College and taught there.
His career began to take off when he moved to Beijing in 1987 to obtain a master’s degree in industrial relations at Renmin University followed by a PhD 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 couple of months—not a study program that might have deepened his understanding of the United States, but one that would have kept him far from China’s center of power in Beijing.
Li you contributed research.