Explainer | Who is Chinese economist Yi Gang, the US-educated governor of the People’s Bank of China?

Since 2018, central bank governor Yi Gang has led financial reforms and debt reduction, while maintaining a prudent monetary stance
Educated in the US, Yi has also been responsible for raising China’s profile on the global stage and continuing its opening to the world

Yi Gang

Orange Wang

Published: 3:00pm, 12 Mar 2023

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As a foreign-educated economist who once had tenure as a distinguished professor at a US university, Yi Gang cuts a distinct figure among China’s army of beige bureaucrats.

And he has unexpectedly secured a second five-year term as head of the central bank, extending his leadership role despite having reached retirement age this year. This gives him the chance to serve longer than usual, and it is particularly eye-catching given that the country has ushered in a mostly new administration under President Xi Jinping.

Yi, the 65-year-old governor of the People’s Bank of China (PBOC), is considered in Beijing to be a straight-talking, pro-market reformer with a scholarly air. Respected for his knowledge of monetary economics, he is also well known for his low-key and balanced work style.

Though he has a comparatively low rank in China’s political hierarchy, Yi has a long working relationship with former vice-premier Liu He, who was once the president’s closest economic adviser, dating back to the late 1990s.

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Fluent in English, Yi gained his PhD in economics in the United States and taught the same subject as an associate professor at Indiana University-Purdue University Indianapolis – an institution he has called his “second home” and at which he worked for about eight years before returning to China in 1994.

The central bank under Yi has refrained from big stimulus measures and held consumer inflation at only 2 per cent last year – a sharp contrast with the 40-year-high inflation seen in major Western countries. He was also tasked with countering financial turbulence when the country saw a massive exodus of capital last year following Russia’s invasion of Ukraine.

Yi said earlier this month that the central bank would maintain a prudent monetary policy and continue to address financial risks.

“We will further create a market-oriented, law-based and internationalised world-class business environment and steadily expand institutional opening up in the financial sector,” he said at a press conference on March 3, just prior to the opening of the “two sessions” parliamentary meetings.

Before taking the helm of the PBOC in 2018, Yi had worked at the Chinese central bank for two decades, including spending more than eight years as deputy governor under Zhou Xiaochuan – known as “Mr Renminbi” for his tireless promotion of the Chinese currency.

But despite his qualifications, the appointment of his first five-year term as China’s top central banker surprised some China-watchers, as it seemed to break an unspoken rule that someone with an overseas background should never be named a leading government official.

Others saw it differently: with Beijing determined to raise its profile on the global stage, while also maintaining policy stability at home, Yi was the obvious choice.

Since 2018, Yi – who closely studied inflation in the 1990s – has maintained a prudent stance on monetary policy, refraining from aggressive stimulus during the pandemic, and not sharply tightening like his Western counterparts have done in recent months to combat inflation.

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On Yi’s watch, the PBOC has accelerated financial reforms, such as introducing the Loan Prime Rate (LPR), which sought to establish more market-based interest rates.

He called for “competitive neutrality” in regards to China’s state-owned enterprises (SOEs) in his first year, responding to Western criticism about the unlevel playing field that has long given state firms an edge over foreign firms operating in China.

He has also stepped up efforts to expand international use of the yuan over the past four years and brought China’s digital currency initiative to the forefront. The country is now leading the race among global central banks in the field.

Under his leadership, the PBOC has accelerated China’s financial opening, lifting the ceiling on foreign ownership of financial institutions and expanding the bond-connect schemes between the mainland and Hong Kong.

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But despite such positive steps being taken, market-access barriers, regulatory risks and geopolitical tensions still constrain foreign businesses in China.

China’s constitution does not limit the term of its central bank governor, but it bars premiers, vice-premiers and state councillors of the State Council from serving more than two consecutive terms. Yi’s predecessor, Zhou Xiaochuan, spent 15 years at the helm of the institution, since he still held a vice-state-level post at that time.

In recent years, China’s central bank has taken a lead role in Beijing’s deleveraging campaign, including on high-profile debt cases at Baoshang Bank and property developer Evergrande Group.

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Though Yi is responsible for running the PBOC, he does not have the final say in its strategic direction. The role of PBOC party secretary was awarded to Guo Shuqing, who is also head of the China Banking and Insurance Regulatory Commission.

Yi Gang was no longer in the Central Committee of the Chinese Communist Party after the 20th Party Congress, meaning he has been away from the country’s nerve centre of policy discussion and development. He was only an alternate member of the Central Committee during the past five years, with no right to vote in plenary sessions.

Born in 1958, Yi’s surprise second term might help mitigate worries about the outlook of China’s monetary policy and Chinese financial policymakers’ international engagement. But who becomes the next party chief of the PBOC, a more preponderant position, remains to be seen.

Either way, Yi has left his mark on the job.

Officials like Yi Gang ... have a lot of friends overseas

Victor Shih, University of California San Diego

In the spring of 2015, while deputy PBOC governor and director of the State Administration of Foreign Exchange, Yi granted a media interview when taking the subway in Beijing.

In China, where government statements are closely scripted and information is tightly controlled, Yi’s off-the-cuff reply became a much-talked-about story at the time, and it hinted at the leadership style he would bring to the PBOC in the years to come.

“Officials like Yi Gang have had a lot of international exposure from early on in their careers,” said Victor Shih, an associate professor of political economy at the University of California San Diego, while speaking at an Atlantic Council event last week.

“They have a lot of friends overseas, which for the party is a little bit problematic, but for China, they really bring a lot to the table, because they’re able to … very comfortably talk to international investors, and international financial institutions such as the IMF, and negotiate with them for various things that China would like to have.”