China’s Quiet Revolution in Central Banking…

Nice article by Miao Yanliang, member of China Finance 40, a Beijing think tank. He points how People’s Bank of China is undergoing changes under their new chief Yi Gang.

…the People’s Bank of China (PBOC) is undergoing its own quiet revolution. Like the Fed before it, China’s central bank is becoming more communicative. But the real revolution in Beijing concerns exchange-rate policy, with the PBOC increasingly allowing market forces to determine the renminbi’s value. Both developments are welcome.

The PBOC’s communication offensive has much to do with its new governor, Yi Gang, who was appointed in March 2018. Last month, the bank hosted its first-ever briefing to explain the latest economic and monetary data. And Yi himself has taken the initiative to explain policy decisions, notably his “three arrows” to support funding for small and medium-size enterprises. The governor also occasionally weighs in about stock-market volatility, even though such interventions may raise eyebrows among central-banking traditionalists.

Another significant move came in January, when the PBOC unveiled a new version of its English-language website. Previously, only about 2% of the Chinese site’s content was available in English, prompting foreign investors to complain about an uneven playing field. But the bank’s new English site covers almost every major aspect of policy, from open-market operations and decisions to the governor’s speeches and activities. For example, it features Yi’s speech last December at Tsinghua University on China’s monetary policy framework, together with an English version of his original PowerPoint slides, which are not available in Chinese on the PBOC’s site.

Although this open communication is certainly important, the PBOC’s increasingly flexible exchange-rate policy is far more transformative. In 2015-2016, the PBOC spent about $1 trillion of China’s foreign-exchange reserves to prop up the depreciating renminbi. These days, the PBOC no longer intervenes regularly in the currency market, and does not have an exchange-rate target.

I just checked PBOC’s new website in English. A big improvement indeed. Lots of interesting stuff to explore..


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