China Economy

Beijing wise to keep its central banker

PUBLISHED : Wednesday, 27 February, 2013, 12:00am
UPDATED : Wednesday, 27 February, 2013, 5:29am

News that central bank governor Zhou Xiaochuan will stay in his post despite reaching the mandatory retirement age of 65 should be welcomed in China and overseas. It would be hard to name another mainland economic official who could match his experience in monetary affairs or enjoy the respect he has from the international financial community.

Zhou, who oversaw key financial reforms on the mainland in the last decade, will remain the head of the People's Bank of China for another year or two. This comes as Chen Yuan , the 68-year-old chairman of China Development Bank, and Li Ruogu , the 62-year-old head of Export-Import Bank of China, will also retain their posts.

Until recently, it was widely expected by many observers that Zhou would have to retire. But his extended tenure, rarely granted on the mainland - along with that of Chen and Li - reflects Beijing's desire to make policy continuity a priority in the face of uncertainties about the global economic recovery.

It is a shrewd decision made by new leaders Xi Jinping and Li Keqiang. As Zhou is close to former president Jiang Zemin and premier Zhu Rongji, his stay in office will help gain support from the old guard. Zhou will continue to push for economic reforms. In the last decade, he helped to overhaul China's banking sector and its interest-rate system, gradually internationalise the yuan and liberalise the country's capital account.

While the central bank does not have full independence like its counterparts in many Western countries, Zhou's prestige is such that it plays a key role in the country's macroeconomic policymaking. Overseas, he has helped win greater influence and representation for China at the International Monetary Fund and the World Bank.

He shocked some and won kudos from others during the height of the global financial crisis in 2009 when he proposed replacing the US dollar as the international reserve currency under a new global regime controlled by the IMF. One suggestion he made was to use the IMF's special drawing rights - whose value is based on a basket of currencies - as the new reserve currency.

Zhou's easy rapport with central bankers of other major economies will hopefully help promote better communication at a time of serious policy disagreements among them.