By Vincent Mivelaz
Following the announcement of Zhou Xiaochuan's retirement five months ago, markets were looking for newly elected People’s Bank of China governor announcement of March 19.
Multiple hints converged towards Liu He, Xi Jinping’s former economic adviser who made a notable showing during this year’s World Economic Forum edition in Davos. With the objective of maintaining stable monetary policy and to continue ongoing financial reforms within the country, the choice fell on Yi Gang, former deputy governor who joined the central bank in 1997.
Adding up to its functions of monetary policy, financial reforms and the promotion of foreign investment in the country, the PBOC will be able to implement laws and regulations for the banking and insurance sectors, adding further control and stability to the Chinese economy which currently suffers from continued shadow banking and industrial overcapacity in the mid-term. On his side, Liu He is appointed as one of China’s four vice-premiers and will be responsible for economic policies and financial issues.
Recent announcements had a rather smooth impact on the equity market and USD/CNY. Hong Kong Hang Seng and Shanghai Composite increase by +0.10% and +0.29%, currently valued at 31’538 and 3’279. USD/CNY is stabilizing at 6.33 (-0.08%) and expected to trade sideways in the short-term.