Zhou Xiaochuan has been in the post since 2002, being one of the longest-running leaders of a large central bank in the world. Like the head of the US Federal Reserve, Janet Yellen, he will also leave the post “soon”, but without specifying a specific date. The People’s Bank of China, unlike the Fed or the European Central Bank (ECB), is not independent, and Zhou’s mandate depends on the orientations of the ruling Chinese Communist Party.
The Chinese central banker, who is fluent in English and has a great experience in international meetings, however, has built himself the image of a reformist who has achieved the inclusion of the yuan among the International Monetary Fund (IMF) units in 2015 despite its still too regulated convertibility.
Extremely discreet as compared to his Western counterparts, Zhou Xiaochuan has been making more speeches for two months and has made many warnings.
In an article in the Communist Party newspaper, he exposed the financial risks – “numerous, significant, hidden, complex, spreading and dangerous” over the background of excessive Chinese debt. The central banker sharply criticized crocodiles and “zombie companies” surviving on credit, calling for the regulation against speculation and poorly regulated financial products to be stiffened.
In October, while the five-year congress of the Communist Party was held, he made numerous warnings, especially about the danger of bursting speculative bubbles.
The Chinese colossal debt (state and private) exceeds 250% of gross domestic product (GDP) and continues to grow, causing concerns from rating agencies and the IMF criticizing credit-stimulated economic growth. Zhou has also contributed to this trend: for years, his institution has been pursuing an extremely flexible monetary policy by injecting a lot of liquidity into the financial system.
Whoever succeeds him in the post, his path will be overwhelmed by obstacles, as a possible mitigation of financial control can cause a massive outflow of capital outside the country.