As China struggles to deal with the slowdown of the world’s second-largest economy, it has embarked on a new strategy of placing financial experts in provinces to manage risks and rebuild regional economies.
Since last year, Chinese President Xi Jinping (習近平) has put 12 former executives at state-run financial institutions or regulators in top posts across the nation’s 31 provinces, regions and municipalities, including some who have grappled with banking and debt difficulties that have raised fears of a financial meltdown.
Only two top provincial officials had such financial background before the last leadership reshuffle in 2012, according to Reuters research.
Among the experts promoted is Beijing Vice Mayor Yin Yong (應勇) a former deputy central bank governor, and Shandong Deputy Provincial Governor Liu Qiang (劉強), who rose through the nation’s biggest commercial banks, from Agricultural Bank of China (中國農業銀行) to Bank of China (中國銀行).
Another newly promoted official, Chongqing Vice Mayor Li Bo (李波), had until this year led the central bank’s monetary policy department.
The appointments — overseeing economies larger than those of small countries — would appear to put those officials in the fast lane as China prepares a personnel reshuffle in 2022, when about half of the 25 members of the Politburo could be replaced, including Chinese Vice Premier Liu He (劉鶴), who is leading economic reform while doubling as chief negotiator in trade talks with the US.
“Bankers are now in demand, as local governments are increasingly exposed to financial risks,” said Feng Chucheng, a partner at Plenum, an independent research platform in Hong Kong.
“These ex-bankers and regulators are given the task of preventing and mitigating major financial risks,” he said.
The appointments have come as economic growth has slowed to its weakest in nearly three decades, while government infrastructure investment has fallen.
Five regional banks were hit with management or liquidity problem this year, raising the prospect of devastating debt bombs lurking in unexpected corners.
“We need to be well-prepared with contingency plans,” Xinhua news agency said after a major annual economic meeting headed by Xi this month.
The economy faced “increasing downward economic pressure amid intertwined structural, institutional and cyclical problems,” it said.
With pressures mounting, local governments are expecting to take the lead in managing their financial scares and cutting the cost of rescue with local intervention, analysts said.
“Appointing financial vice governors to provinces can help better integrate financial policies into local practice, and to prevent financial risks beforehand,” said He Haifeng (何海峰), director of Institute of Financial Policy at the Chinese Academy of Social Science, a government think tank.
“Such appointments have also showcased a change of manner in official appointments,” He said.
Financial executives were long shunned for leadership positions.
Banks were nationalized after the Chinese Communist Party took power in 1949 and many bankers were purged during the Cultural Revolution.
Xi started to stress the importance of financial expertise and to elevate the status of executives in 2017.
“Political cadres, especially the senior ones, must work hard to learn financial knowledge and be familiar with financial sectors,” Xi said in a national meeting on financial affairs.
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