During his 15 years in office, Zhou Xiaochuan has freed up China’s financial markets, established the renminbi as a global currency, expanded capital flows and presided over generally strong growth and low inflation.

But as he prepares to retire as governor of the People’s Bank of China(PBoC), Zhou, 70, knows his legacy is not yet secure.

Unlike in the West, the powers of China’s central bank governor are limited. The PBoC comes relatively low down in the bureaucratic pecking order. The bank is not independent. It executes monetary policy, but the big decisions on the level of interest rates and the value of the currency are made at the highest echelons of the ruling Communist Party.

These constraints make Zhou’s achievements even more remarkable.

Take the renminbi. Until 1994, foreign visitors were forbidden to possess the Chinese currency and had to use foreign exchange certificates, a form of Monopoly money worthless outside China. Yet by 2015, under Zhou’s nurturing, the renminbi had won the International Monetary Fund’s stamp of approval as one of the five main global currencies.

Zhou set the ball rolling in 2005 when he persuaded the leadership in Beijing to scrap the renminbi’s longstanding fixed peg to the dollar so it could float, to some degree, in response to economic conditions. As a reform-minded economist, Zhou knew that allowing market forces to play a greater role in determining the exchange rate and interest rates was critical to improve the allocation of capital inside China and thus raise economic efficiency.

In the same vein, Zhou has overseen the modernization of China’s money and capital markets. Once derided as casinos, the markets are still carefully monitored by the state. But their transformation is such that Chinese bonds and equities are likely to be added soon to global indexes, making them much more attractive to foreign investors.

Zhou has long championed easier inflows and outflows of capital – alongside a freer-floating exchange rate – as a means of galvanizing China’s lumbering state-owned banks to raise their game and adapt to market signals instead of blindly carrying out state orders.

Speaking of his reform agenda, he told an interviewer last year: ‘There’s an English saying: We’ve passed the point of no return.’ But recent history shows that’s not necessarily true.

Xi Jinping appears to have no great interest in economics. But he is determined to strengthen his own power and that of the Communist Party. To that end, economic and financial policy decisions must serve above all to cement political and social stability. So when China’s stock market crashed in 2015 and the country was haemorrhaging foreign exchange reserves, the politburo clamped down on capital outflows and took a tighter grip once more on the renminbi. Efforts to promote the international use of the currency were put on hold.

The episode was an undoubted blow to Zhou and fellow reformers. Xi is set to rule for as long as he chooses once China’s parliament rubberstamps the party’s proposal to scrap the 10-year limit on the president’s term of office. So further economic liberalization as urged by the central bank chief will continue to depend on which way the political winds are blowing. Right now, the state is strengthening its control of the economy, not loosening it.

A second reason why a question mark will remain next to Zhou’s legacy is that he must share the blame for not having offered greater resistance to the credit boom ordered by the leadership to bolster growth after the financial crisis of 2008. Even if the economy is now back on a firm footing, critics say debt has risen so sharply that a wave of defaults and bankruptcies is inevitable at some point, with serious repercussions for the global economy.

Perhaps with an eye on his place in the history books, Zhou recently warned that China might indeed be enjoying the calm before the debt storm. Don’t blame me if things go wrong from here, he seemed to be saying.

A fluent English speaker comfortable with foreign journalists, Zhou could have been contemplating the reputational fate of his peer, former US Federal Reserve chairman Alan Greenspan. Once hailed as the ‘maestro’, Greenspan is now faulted for sowing the seeds of the financial crisis by keeping interest rates too low for too long.

So it is too early to pass definitive judgment on Zhou.

10 Mar 2018/Saturday.


  In a shocking bombshell interview, an academic with close ties to the Chinese government has warned that war with North Korea was on the table, if it continues with its missile and nuclear tests. Chong Sho-Hu, who is a professor of international relations at the Renmin University, in Beijing, said North Korea was "seeking death". He also confirmed the long-lasting era of Chinese friendship with North Korea has ended. Despite historic ties between the two countries, president Xi Jinping has reportedly become "fed up" with the erratic behaviour of the North Korean dictator Kim Jong-Un. Speaking to the BBC, the professor warned that one more missile test would be the move "to push the country off the cliff". President Jinping was said to be "boiling with fury" after North Korea recently tested a missile just as China was gearing up to host a pivotal global economic conference.  The former US ambassador to China Max Baucus recently claimed the only time he saw the Chinese leader use "undiplomatic language" was in relation to Kim Jong-Un. Professor Sho-Hu, who has ties to China's defence and foreign affairs establishment, suggested that the time may have come for a military solution to the problem.

The question being asked by the international community is that whether Xi Jinping will sacrifice its long term friend North Korea, in order to bolster its image. The continued backing of North Korea has put China into a tight spot as it is being pressurised by world powers to reign in Kim Jong Un. China considers North Korea more of a liability now. The timing of the interview also coincides with  the 19 National Congress in China, where President Xi Jinping is likely to declare himself as the lifelong Chairman of the Communist Party Of China. The changed position on North Korea is likely to be advantageous to his image, which has been criticised by the US, which has accused China of going against the established world order.


As President Xi tries to tighten his grip on power, China’s 19th Party Congress (19PC) will answer some key questions that will shape future course of China:

Will Xi Jinping stay on as President? And how centralised will power become? In nutshell the future course of China will become clear what to expect during the coming weeks.

On October 18th, the 19th Party Congress (19PC) of the Communist Party of China (CCP) will open in the Great Hall of the People in Beijing. . Held every five years, the Party Congress features the election of the new Central Committee (205 members and 171 alternate members), which in turn elects a new Politburo (25 members) and Politburo Standing Committee (5-9 members). Nearly 3,000 delegates, who collectively represent almost 90 million Communist Party members across China, have been chosen to attend the highly coveted event. Judging from the list of military and police delegates to the forthcoming congress where China's future leaders are to be unveiled, the largest turnover of senior officers in the history of the People's Republic of China (PRC) is set to occur.

An extraordinary 90% of the 300 military delegates will be first-time attendees.

At most, only 17% (seven of 41) of the military representatives with full membership on the 18th Central Committee will retain their seats.

This would constitute the largest-ever turnover of military elite in the history of the PRC.

China watchers are following the event with baited breadth with an eye on following issues

Xi Jinping’s to attempt Longer Hold on Power

Chinese law stipulates that a President of China cannot serve more than ten years, or two consecutive terms. There are, however, no legal limitations on how the length of service of a General Secretary or Chairman of the CMC.

Though, Xi Jinping is expected to stay on as President, Commander-in-Chief, General Secretary of the ruling CCP, Chairman of the Central Military Commission (CMC) and “core” leader for at least another term, he is likely to consolidate his hold on power for longer duration. However, it is also likely that he will attempt to consolidate his position in order to stay on beyond 2022 and serve a third term. The model likely to be followed by him on the same lines as previously used by only Mao Zedong. The title of Chairman will earn him a third term also.

Who will be In-Who will be Out

In all probability loyalists will be retained and followers of Deng Xiao Png camp will be weeded out beside a compromise candidates being retained.

Li Keqiang – the current Premier is likely to stay on, although there are rumours that Li could leave his post but stay in the Standing Committee by becoming Head of the National People’s Congress. Li Zhanshu, the current Director of the CCP’s General Office, has the best cut shot of going up, most likely as Chairman of the Central Commission for Discipline Inspection – assuming, of course, that Wang Qishan definitely leaves. Vice-Premier Wang Yang also has a good chance of going up, probably as Chairman of the Chinese People’s Political Consultative Conference, although Wang maintains a low profile and claims to have no aspirations for the Standing Committee.

At the Standing Committee, four members are mandated to retire. These are Zhang Dejiang, Chairman of the National People’s Congress (NPC); Yu Zhengsheng, Chairman of the Chinese People’s Political Consultative Conference; Liu Yunshan, Secretary of the Secretariat and Leader of the Propaganda Leading Group; and Zhang Gaoli, Vice-Premier.

There will also be a significant shake-up further down. As a result of the anti-corruption drive, 150 ‘tigers’ (senior officials) have been purged, including 17 full members of the Central Committee. Adding those who were purged to the 90 members who are due to retire, it is clear that 107 seats out of 205 total will be empty.

The most important Ministries to watch where personnel will change are the General Office, Ministry of Public Security, Central Commission for Discipline Inspection, Ministry of State Security, Organisation Department of the CCP, and the military.

The final thing to look out for will be the number of seats in the Standing Committee, which could change depending on who rises or falls. Historically, it can be anywhere from 5 to 9 and there were murmurings at the beginning of 2017 that Xi might reduce the number of seats in the Standing Committee from 7 to 5. However, the majority of 19PC projections now believe it will be 7. This would be consistent with the fact that in 2002 and 2012 the number of seats has changed, but in 1997 and 2007 it stayed the same.

Constitutional Amendments

The current constitution upholds ‘Mao Zedong Thought’, ‘Deng Xiaoping Theory’, the ‘Three Represents’ (Jiang Zemin’s legacy) and the ‘Scientific Outlook on Development’ (referring to Hu Jintao). Only Mao and Deng are explicitly named.

Xinhua News, the PRC’s official press agency, confirmed that the constitution will be amended to “include the key theories and strategic thoughts” – making it likely that Xi and his “Chinese dream” will be immortalised. In the arcane hierarchy of the CCP,  semantics matter: if Xi is mentioned by name, and if his contribution is referred to as ‘Thought’ (like Mao) rather than ‘Theory’ (like Deng), this will be a strong indication that Xi has consolidated power.

Changing Retirement Age

The “67 up, 68 down” rule is likely to be bent during the upcoming Congress. The rule, introduced in 2002, stipulates that officials who are 68 or older cannot serve a new term on the Politburo Standing Committee – the most powerful decision-making body in China.

By this logic, five of the current seven members of the Standing Committee are due to retire. At least three of these five are opposed to Xi, who will benefit from their departure. However, the rule also serves as a potential check on his ability to serve a third term, as Xi will be 72 in 2022. If Xi bends the rules by keeping 69-year old Wang Qishan, the current head of the anti-corruption campaign, on for another term, this will be a sign that Xi himself may seek to stay in power.

If Xi does not sidestep existing age-related measures and find a ‘special arrangement’ to keep Wang on, he will likely find him a different prestigious role. There are even suggestions that Wang could even replace Li as Premier.

So the biggest question will be whether or not Xi Jinping unites the party establishment by forming a team of rivals and deepening China's political institutionalisation.

Abiding by established rules and norms and respecting the peaceful transition of power all carry profound implications for the future direction of the country.