Meet the Chinese central banker who holds the economic future of the world’s most populous nation in his hands
Foreign Policy has an exclusive excerpt of a chapter of The Alchemists that reports on China’s central bank and its leader. Zhou Xiaochuan, has been governor of the People’s Bank of China for more than a decade, and in that role has tried to guide the world’s most populous nation toward a modern financial system. But he lacks the power and independence that many of his counterparts at the advanced nations’ central banks take for granted, and the question for the future of the Chinese economy is whether he and his successors will succeed in merging the best lessons of Western finance with the unique politics and culture of China. Read the full excerpt here.
Here are a couple of chunks:
Even among people who devote their lives to studying Chinese policymaking — analysts, diplomats, academics — the details of how the central bank’s decisions actually get made are murky. It is presumed that Zhou and PBOC staffers have at least some say. “I think they’re part of the intellectual debate, but I don’t think they’re part of the power structure,” said an academic with deep relationships within the PBOC. As a U.S. official experienced in dealing with China matters put it, a Chinese diplomat to Washington can learn more about how decisions are made at the highest levels of the U.S. government by reading a few days’ worth of the New York Times and the Washington Postthan a U.S. diplomat to Beijing can from years of assiduously cultivating government sources.
To understand the PBOC’s policies throughout the crisis, then, one has to understand the political system and political culture in which it operates. Every government has a wide range of tools it can use to influence the economy — most significantly, taxing and spending, regulation, domestic monetary policy, and international currency policy. The major Western democracies have delegated those different tools to different arms at the state: Taxing and spending is the province of elected officials. Regulation is generally carried out by executive agencies. And monetary policy, experience has convinced the West, is best left in the hands of independent technocrats who are largely separate from politics.
The Chinese system essentially puts all these tools of state power over the economy in the same hands, at the highest levels, aiming to use them in concert to realize the government’s overarching goal. And that goal, more than anything, is self-preservation. Communist Party leadership in China has an implicit deal with the country’s 1.3 billion citizens: Leave us in power, and we will maintain rapid growth that will result in steadily rising standards of living.