Opinion | The People’s Bank of China is quietly reforming, opening up and taking its hands off the yuan

Fifteen years ago, Alan Blinder, a former vice chair of the US Federal Reserve and a professor of economics at Princeton, wrote a book titled The Quiet Revolution, about changes in central banking. Chief among these was a move by some central banks towards open communication and transparency, and away from their long-held tradition of secrecy and surprise. A central bank “goes modern”, to borrow from the subtitle of Blinder’s book, when it starts talking. 

The Fed was slowly heading in this direction by the turn of the century. It finally began announcing its interest-rate decisions in 1994, and issuing regular statements in 2000 (though it did not hold regular press conferences until 2011). These changes reflected a new appreciation among central bankers of how changes in short-term policy rates work their way through the economy via expectations and market pricing.

Today, the People’s Bank of China is undergoing its own quiet revolution. Like the Fed before it, the Chinese central bank is becoming more communicative. But the real revolution in Beijing concerns exchange rate policy, with the PBOC increasingly allowing market forces to determine the renminbi’s value. Both developments are welcome.

The bank’s communication offensive has much to do with its new governor, Yi Gang, who was appointed in March 2018. Last month, the PBOC hosted its first-ever briefing to explain the latest economic and monetary data. And Yi himself has taken the initiative to explain policy decisions, notably his “three arrows” to support funding for small and medium-sized enterprises. The governor also occasionally weighs in on stock market volatility, even though such interventions may raise eyebrows among central banking traditionalists.

Another significant move came in January, when the PBOC unveiled a new version of its English-language website. Previously, only about 2 per cent of the Chinese site’s content was available in English, prompting foreign investors to complain about an uneven playing field. But the bank’s new English site covers almost every major aspect of policy, from open-market operations and decisions to the governor’s speeches and activities. For example, it features Yi’s speech last December at Tsinghua University on China’s monetary policy framework, together with an English version of his original PowerPoint slides.