◼ ECONOMICS Bloomberg Businessweek June 17, 2019
35THEBOTTOMLINE People’sBankofChinaGovernorYiGangis
followingin hispredecessor’sfootstepsandallowingthepublic—
andforeigninvestors—aclearerviewintoitsinnerworkings.banksinsupportinggrowthamidanescalating
confrontation between Washington and Beijing.
There’s “tremendous” room to adjust policy,
Yi said, conceding that tariffs have been a drag
on exports and the economy. If President Trump
makes good on his threat to slap duties on all U.S.
imports from China, “that would be a disaster
for the global economy,” Yi said. As for the yuan,
which has been close to breaking through seven to
the dollar as economists pare back their Chinese
growth forecasts, he says that “a little bit of flexi-
bility of renminbi is good for the Chinese economy
and for the global economy, because it provides
an automatic stabilizer.”
One of the ironies of Trump’s frequent com-
plaints that China manipulates its currency is that
all recent signs are that, if anything, the PBOC has
been acting to support, not weaken, the yuan,
accordingtoanalysts.“ThecentralbankofChina
isprettymuchnotintervening intheforeign
exchangemarketfora longtime,andI hopethat
thissituationwillcontinue,”Yisaid.
LikeZhouXiaochuan,thelong-servingPBOC
governorhereplacedin2018,Yiis a reformerwho’s
ateaseontheglobalstage,thankstohisfluent
Englishandstintsstudyingandteachingabroad.
Recently,hisportfoliohasexpandedbeyondmon-
etarymatters,asVicePremierLiuHehasdrafted
himontotheteamnegotiatingwiththeTrump
administrationtorollbacktariffsonChinesegoods.
ThosetalksbrokedowninMay,leadingboth
sidestoratchetupdutiesoneachother’sprod-
uctsandbroadentheconfrontation intonew
areas.TheTrumpadministrationhasdeclared
a ban onbusiness with telecommunications
giantHuaweiTechnologiesCo.,whileChina’s
MinistryofCommerceannouncedonMay31 that
it’s assembling a list of “unreliable entities” that
will include foreign enterprises, organizations,
and individuals that don’t obey market rules,
violate contracts, and damage the interests of
Chinese companies. While the list hasn’t been
made public, Ford Motor Co.’s main joint ven-
ture in China was recently cited for antitrust vio-
lations, while FedEx Corp. is being investigated for
“wrongful” deliveries.
Recent data suggest China’s economy is decel-
erating again despite a fresh dose of stimulus. The
challenge for the PBOC is how to support the near-
term goal of shoring up growth without abandon-
ing the longer-term objectives of reducing risk in
the financial system and curbing the expansion of
debt, which now approaches three times annual
economic output.
Yi has already lowered the share of deposits
banks need to keep at the central bank—known as
the required reserve ratio—and economists expect
more reductions to free up funds for loans. He’s
also ensured money markets have ample liquid-
ity, a crucial step in avoiding a credit crunch if
a lender runs into trouble, as happened with
Baoshang Bank, which was seized by regulators
this month. At the same time, Yi hasn’t moved
benchmark interest rates, which haven’t changed
since late 2015. China’s monetary policy has “to
be in a sober mind position,” he said. Fiscal sup-
port, in the form of tax cuts, is helping, too, mean-
ing “the current package is able to cover the cases
where the situation is getting a little bit worse,”
he explained.
Coordination of fiscal and monetary policies is
harder to pull off in countries with independent
central banks, but not in China, where the PBOC
reports to the State Council (the equivalent of the
cabinet). While that means policymaking is often
dictated by political considerations, it can also
help deliver a speedy response to cyclical swings
in the economy. “The head of the Fed in China is
President Xi,” said Trump in a June 10 interview on
CNBC, as he lamented his own lack of control over
monetary policy.
Larry Hu, chief China economist at Macquarie
Group, notes that Yi’s willingness to meet with for-
eign reporters is encouraging. “Being able to com-
municate well with Western investors is a powerful
weapon, not only for Jack Ma but also for Chinese
central bankers,” he says. �Bloomberg News