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meet the candidates

31 January 2018

The central bank, finance ministry and (probably) insurance regulator will all soon see new leadership—China Policy looks at the key contenders.

Two key jobs will be filled in China’s top policy circle around the Two Sessions in March: People’s Bank of China (PBoC) governor 周小川 will step down, and finance minister 肖捷 is expected to move back to the State Council. A third post—China Insurance Regulatory Commission 郭树清, leading (CIRC) director—could be either filled or abolished. It has remained empty 项俊波 contender to lead PBoC since the April 2017 arrest of , spurring rumours that the regulator will be merged into China Banking Regulatory Commission (CBRC). Alternatively, a stronger leader could be put in place if Chinese authorities adopt the IMF’s December 2017 recommendation to strengthen the CIRC’s independence. Three contenders for the PBoC post stand out. Listed by likelihood, they The three contenders for are Guo Shuqing 郭树清 CBRC chair; 刘士余 China Securities the PBoC governor are Guo Regulatory Commission (CSRC) chair; and Jiang Chaoliang 蒋超良 Shuqing,Liu Shiyu and Jiang party secretary. Based on past appointments and government documents, Chaoliang four criteria are key: age, financial and economic expertise, relevant experience and political rank. All would continue PBoC’s current agenda, especially on the shadow banking crackdown, though with slightly different focuses. A major player in the ‘financial regulatory windstorms’, Guo has fought to curb leverage in financial markets, resulting in negative growth in banks’ general assets in the first half of 2017. His promotion might secure his support for PBoC policy on integrated asset management products, an initiative he has been observed subtly resisting. Having worked to stop small investors from being preyed on by bigger ones, Liu may be most responsive to the views of investors. And given Jiang’s current focus on local management and inclusive finance, he may carry out policies emphasising support of the real economy. The top contenders for the Ministry of Finance (MoF) post are Wang Jun 王 The three contenders for 军 State Administration of Taxation (SAT) director and Ding Xuedong 丁学 finance minister are Wang Jun 东 State Council Deputy secretary general. A former MoF executive deputy and Ding Xuedong minister with considerable tax expertise, Wang may be chosen to fast-track central-local fiscal division and accelerate the fiscal federalism agenda, under which local authorities will eventually take full responsibility for their spending. Ding’s post at China’s sovereign wealth fund gives him experience managing investments and an international outlook. He may promote MoF’s agriculture and enterprise portfolio and introduce international best practices.

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If it is not merged into the CBRC, the more junior CIRC post will probably If it is not merged into the be filled by a lower-ranking Central Committee alternate (rather than full) CBRC, the more junior CIRC member. The top contenders are Liao Jianmin 缪建民 People’s Insurance post will probably be filled Company of China (PICC) chair and Tian Guoli 田国立 China Construction by a lower-ranking Central Bank chair. The only Central Committee member with insurance experience, Liao is the most likely candidate. Either Liao and Tian would likely continue Committee alternate member undoing Xiang’s de-regulation of the sector. Detailed profiles below describe the qualifications and known policy views of eight candidates for the three jobs: those mentioned above, and one long- shot candidate rumoured to be under consideration for the PBoC post.

criteria

To be considered for top financial posts, candidates must qualify on their To be considered for top age financial posts, candidates must qualify on their age, In principle, ministers must retire at age 65. Because ministers have a five- financial expertise, experience year term, candidates younger than 60 are preferred. Due to the particular and rank importance of monetary policy continuity at PBoC, the state prefers long tenures, and a younger candidate would have some advantage. Current governor Zhou has held the post for 15 years. However, older candidates could be picked for their experience. Former NDRC director 徐绍 史 and finance minister Jiwei 楼继伟 were appointed at ages 62 and 63. financial expertise As financial markets become increasingly sophisticated, regulators require more expertise. This is particularly true for PBoC, whose officials proportionally have the most advanced degrees of any central agency. Zhou earned a PhD at , researching economic systems engineering. Having published numerous influential papers and books, he was a driving force behind economic institutional reform in the 1980s. experience Candidates also require financial experience, acquired through work at the big four state-owned banks, the central bank, the finance ministry, financial regulators, and the sovereign wealth fund. rank Historically, the lowest rank of an incoming PBoC governor or MoF head has been vice minister and Central Committee alternate member. As these positions become more important, they are likely to be entrusted only to more senior leaders: ministers and full members of the Central Committee full member. The more junior CIRC job is likely to go to a vice-minister/alternate member, if it is not abolished.

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PBoC governor candidates

Guo Shuqing 郭树清 CBRC chair; Central Committee (CC) full member; age 61

Seen as front runner since his 2017 appointment to CBRC, Guo is the oldest candidate. Upon taking office, he launched a deleveraging ‘regulatory windstorm’, earning the nickname ‘Whirlwind Guo’. As a result, bank assets saw negative growth in May 2017. During the year he has been in office, CBRC has levied significantly more penalties and fines and brought down numerous senior bankers. governor 2013-17, Guo made bold moves to revive the third largest provincial economy, establishing the first provincial social security council. Holding C¥18 bn or 30 percent of Shandong SOE shares, this council provides a check on the provincial SOE administrator and challenges the national council’s pension investment monopoly. CSRC chair in 2011-13, he advocated IPO reform, calling for a simpler registration process. The market, not officials, should decide stock value, he insisted. Guo pushed pension funds to invest in stocks, while discouraging low-income individual investors. Specialising in economic restructuring, Guo started his career as a State Council researcher in 1988, rising to secretary-general of State Planning Commission in 1996. He was vice governor in 1998, and then director of the foreign exchange agency and PBoC vice governor in 2001. In 2003, he became chief executive of Central Huijin Investment Ltd., a subsidiary of China’s sovereign wealth fund. Guo served as chair of (CCB) 2005-11, and was a level- headed manager: CCB observed a credit growth slowdown in this period despite the 2008 stimulus.

Liu Shiyu 刘士余 China Securities Regulatory Commission CSRC chair; CC full member; age 56

Liu is known as a fierce, often outspoken regulator since his December 2016 off-script rebuke of insurance firms, calling their over-leveraged acquisitions of listed firms ‘barbaric’. At CSRC he has targeted ‘financial crocodiles’ exploiting small investors; the regulator issued C¥7.4 bn in fines in 2017, 74.4 percent higher than in 2016. In 2017, Liu prioritised cleaning up the backlog of enterprises waiting for reviews to be listed, cutting it by 31 percent in 2016-17. Tightening requirements, CSRC has rejected significantly more enterprises for listing: 146 in 2017, up from 77 in 2016. Agriculture Bank of China chair 2014-16, Liu reportedly led the drafting of the July 2015 Internet Finance Law, striking a balance between innovation and oversight. Insiders claim he managed risk well, despite the highest NPL ratio among all state banks. Holding a PhD in economics, he started his career in economic planning posts and worked at China Construction Bank CCB 1987-96. After moving to the PBoC in 1996, Liu rose rapidly from deputy department director to serve as vice governor 2006-14.

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Jiang Chaoliang 蒋超良 Hubei party secretary; CC full member; age 60

A financial veteran, Jiang has spent 30 years in China’s banking system, finding powerful patrons among his superiors. At ABC in 1981-96, he impressed then-vice president 戴相龙, who was promoted to PBoC governor 1995-2002. At PBoC 1996-2002, Jiang was summoned to Guangzhou in 1998 to assist Wang Qishan 王岐山, then vice governor, on China’s first non-bank financial institution bankruptcy, building close ties with Wang. In 1998, he began a meteoric rise. Elevated to PBoC assistant governor 2000-02, he was appointed chair 2004-08, following a two-year stint in provincial government. Leading the bank’s restructuring and listing in mainland China and Hong Kong, he established a model for other state banks.From 2008-2011, Jiang was deputy chair and governor of . From 2011-14 he was chair of Agricultural Bank of China, overseeing a C¥4.3 tn growth in assets. Experienced in provincial administration, Jiang was first dispatched to Hubei 2002-04 as deputy governor, and later to as governor and deputy party chief 2014-16. His appointment to Jilin was regarded as a testing ground for higher promotion. In the northeastern province, he coped with a declining economy by focusing on the service sector, achieving growth above the national average in 2016.

Yi Gang 易纲 PBoC vice-governor; CC alternate member; age 59

A strong candidate from a policy perspective, Yi appears to be governor Zhou’s preferred successor, thanks to their decades-long partnership. But due to his lower ranking as a CC alternate member, and his lack of experience outside PBoC, Yi is a long-shot candidate. PBoC vice governor from 2007, Yi is in charge of monetary policy and international business. Yi is notable for his level-headedness and independence, cautioning regulators against overreaction to major market events. During the rush to implement supply-side reform and deleveraging, Yi advocated demand side management to avoid debt-deflation spirals in early 2016. He made a risky departure from the Party line by calling for stabilising deleveraging in 2016, advocating limits on leverage growth rather than leverage itself. Relatively liberal on finance, Yi called for greater RMB flexibility after increased capital controls in 2015-17. Yi and former PBoC vice governor Wu Xiaoling have pushed for revising the 2007 Corporate Bankruptcy Law, to allow individuals to declare bankruptcy and create a bankruptcy tribunal system.

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CIRC chair candidates

Liao Jianmin 缪建民 People’s Insurance Company of China (PICC) chair; CC alternate member; age 52

Liao’s 2017 appointment came at a critical time for PICC, China’s first insurance conglomerate. After its Hong Kong listing in 2012, the company’s domestic listing has been delayed repeatedly. Suffering from losses of top executives, its market share is in decline, while its health division has endured years of losses. Liao was brought in to build a new leadership team, and is expected to focus on overseas growth. During his previous career at China Life Insurance Company Ltd (vice president in 2006, chair in 2008, vice chair and president in 2013), the company achieved explosive growth in overseas assets, especially real estate. Headline deals included the acquisition of 10 Upper Bank Street and more than 200 US warehouses. Holding executive positions at China Insurance International Holdings Company Limited from 1995-2005, Liao is experienced in both global asset management and insurance. He started his career at PICC from 1989-1995 as a local officer.

Tian Guoli 田国立 China Construction Bank (CCB) chair; CC alternate member; age 58

Sitting on the monetary policy committee and the advisory committee for the 13th 5-year plan from 2015, Tian has had a distinguished career in SOE leadership. Tian worked at CCB 1983-1999, rising from department manager in 1994 to assistant president in 1997-99, overlapping with then-CCB president Zhou Xiaochuan (1998-2000). Moving to the newly-founded Cinda Asset Management company, he rose from vice president to president to chair while performing a commercial restructuring (1999-2010). After a stint as CITIC group president (2010-13), Tian moved to BoC in 2013 and CCB in October 2017.

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