China's central banker skips retirement bar to stay on

Compulsory retirement for governor ruled out by party leaders in effort to retain stability amid global financial turmoil, sources say

PUBLISHED : Thursday, 21 February, 2013, 12:00am
UPDATED : Thursday, 21 February, 2013, 7:34am

China's central bank governor, Zhou Xiaochuan, will retain his post despite reaching the compulsory retirement age of 65 and being left out of the inner-circle of the Communist Party in last year's leadership reshuffle, sources told the Post.

The top leaders reached a consensus that Zhou, who has headed the People's Bank of China (PBOC) for a decade, should keep running the central bank of the world's second-largest economy for another year or two in order to maintain China's fiscal stability and policy continuity, sources said this week.

The move came as a surprise as Zhou last month turned 65 - the mandatory retirement age for mainland officials - and was omitted from the Communist Party's Central Committee, membership of which is usually a political credential for holding such a ministerial-ranking job.

Sources said Zhou would probably be appointed a vice-chairman of the Chinese People's Political Consultative Conference next month, giving him "state leader" status and exempting him from retirement.

Bank of China chairman Xiao Gang, 54, who was made a full member of the Central Committee in November, is tipped to become party chief of the PBOC, enabling him to eventually take over from Zhou.

If Zhou had stepped down next month it would have triggered a round of reshuffles. But the new arrangement is seen by the leadership as necessary for maintaining monetary stability amid global financial volatility.

It also allows new leaders Xi Jinping and Li Keqiang to focus on consolidating power and carrying out reforms in the face of deep-rooted problems such as corruption and social inequality. The plan is subjected to confirmation at the annual meeting of the legislature next month, sources said.

It's hard to find a suitable candidate in China who can match Zhou in terms of familiarity with international financial system rules and profound academic background

Zhou's knowledge of monetary affairs has made him a respected figure around the world.

"It's hard to find a suitable candidate in China who can match Zhou in terms of familiarity with international financial system rules and profound academic background," said Liu Yuhui, a researcher at the Chinese Academy of Social Sciences.

But he said as the independence of the central bank was questionable, its role in macroeconomic policymaking should not be overestimated.

Huang Yiping, Barclays Capital chief economist for emerging Asia, said: "Major central banks in developed nations have implemented quantitative easing policies. Amid an increasingly uncertain global environment, PBOC's communication with Western central banks such as the US Federal Reserve and ECB [European Central Bank] has become more important."

He added Zhou would face many highly technical tasks in the years ahead including promoting the yuan, gradually opening the capital account and reforming the interest rate system.