China’s central government has appointed financial specialists as deputy provincial governors in the hope that their rich experience will drive financial reforms
On October 17, Cai Dong, former deputy president of the Agricultural Bank of China (ABoC), was named deputy governor of Northeast China’s Jilin Province. It was only six months since Cai transferred to the ABoC from the China Development Bank (CDB). Previously, Cai had worked with the Industrial and Commerce Bank of China (ICBC) for 20 years.
Cai is the sixth deputy provincial governor to be appointed from the financial sector this year. Analysts said his quick transfer is evidence of the central government’s focus on revitalizing the economies of the northeast, which lag behind those of the developed southeastern provinces. According to an expert who refused to reveal his name, the central government has been appointing officials with financial experience as deputy provincial governors since 2017.
The expert told NewsChina that the recent provincial-level promotions suggest the central government is increasing emphasis on financial reforms, because officials from the financial sector usually serve in city positions.
Sixteen out of the Chinese mainland’s 32 regions (which include 23 provinces, four municipalities and five autonomous regions) have deputy governors with financial experience. Thirteen were appointed between 2017 and 2019.
Young and Experienced
Based on their resumes, the majority came from the top five State-owned banks and financial regulatory departments. For example, Beijing deputy mayor Yin Yong, Chongqing deputy mayor Li Bo, former deputy governor of Guangdong Province Ouyang Weimin, and Zhejiang Province’s deputy governor Zhu Congjiu have all worked for the People’s Bank of China (PBoC). Zhu also served on the China Securities Regulatory Commission (CSRC). Other notable officials who have worked for the CSRC include Shanghai deputy mayor Wu Qing and Yunnan Province deputy governor Chen Shun.
Similar to Cai Dong, many of the governors worked in more than one bank or served as branch heads of State-owned banks. Hebei Province deputy governor Ge Haijiao, for example, worked with the ABoC for 23 years before he transferred to China Everbright Bank in 2016. There he served as president of the ABoC’s municipal branches in Liaoyang, Liaoning Province and president of the provincial branch in Heilongjiang Province. Tan Jiong, deputy governor of Guizhou Province, ran five local branches during his 28 years at the Bank of China (BoC). Another advantage of these governors is their age. Most were born after 1965, with six after 1970, making them younger than most officials at the same level. According to media reports, nine of the 16 officials are the youngest deputy governors in the province’s history.
Being young does not mean they are inexperienced. All have noteworthy educational backgrounds, with 12 holding doctorates (nine in economics and three in management).
Guo Ningning, a deputy governor of Fujian Province, for example, received her bachelor’s, master’s and doctoral degrees from the School of Economics and Management, Tsinghua University. Media dubbed Li Bo “the curve wrecker for officials” because of his PhD in economics from Stanford University and doctorate in law from Harvard. Wang Jiang, a deputy governor of Jiangsu Province, was once an associate professor of finance at Shandong Economic University and a senior visiting scholar at the Xiamen University School of Economics.
Many of the governors have experience abroad. Ge Haijiao, for example, has worked with both the Singapore and Sydney branches of the ABoC, and Guo Ningning led the BoC’s Hong Kong transaction center before she was promoted to president of the BoC’s Hong Kong and Singapore branches. Thanks to his experience as general manager of the China Investment Corporation Singapore Branch, a State-owned enterprise engaged in foreign currency investment, Yin Yong was transferred to the State Administration of Foreign Currency (SAFE) to manage currency reserves, before being transferred to the PBoC.
The Rescuer
According to analysts, the increased appointment of governors with experience in finance followed the central government’s fifth financial working conference held in July 2017, which aimed to reform financial regulation and improve the level of financial knowledge among local officials.
Five days after the conference, Wang Jiang, a former deputy president of the Bank of Communications, was sent to Jiangsu Province to serve as deputy governor.
“China’s [current] financial system is increasingly incapable of meeting the demands of the economic transition... Specifically, we have a pool of weak links in the financial industry. For example, many small- and micro-sized enterprises in service, agriculture and technology can not secure loans, but they are pillars in the new round of industrial upgrading,” Ba Shusong, deputy director of the Finance Research Institute under the Development Research Center of the State Council, warned in 2013 during a speech at the fourth Financial Leasing Conference held in Tianjin.
China’s Northeastern provinces of Jilin, Liaoning and Heilongjiang, which have the lowest GDPs in the country, face this problem. At a 2017 local summit forum on revitalizing tech, finance and industry in Northeastern China, Zhang Guobao, director of the State Council’s leadership team on invigorating Northeast China’s former industrial bases, said local businesses were “bleeding” because they were running up debts and unable to secure loans from local banks.
Cai Dong, a veteran banker, was sent to the rescue. According to media reports, Cai advocated for digital and intelligent financial services and emphasized the real economy. “Economy and finance are like the body and blood that coexist and depend on each other. Financial activity cannot stand without the real economy... We have to bring our focus back to supporting the real economy,” he said at a banking development summit in Shanghai held in September.
In January, the State Development and Investment Cooperation and the CDB, one of Cai’s former employers, set up a system to invigorate finance in Northeast China. They headquartered in Jilin in September, one month before Cai was appointed deputy governor of the province. Guo Shuqing, former governor of Shandong Province, has set a good example as to how financial officials can promote local financial reforms. Guo was director of the CDSR before becoming governor of Shandong in 2013. Five months after his appointment, Guo released a guidance document on promoting local financial reforms that allowed for private banks and financing companies and encouraged private investors to join in the reconstruction of financial departments. The document helped raise the value of Shandong’s financial industry by 61.7 percent from 2012 to 2015, official data showed.
His successor, Shandong’s current governor Gong Zheng, also holds a doctorate in economics, and newly appointed deputy governor Liu Qiang, formerly of the ABoC and BoC, shares views with Cai. Soon after taking up the post, the youngest deputy governor in Shandong signed an agreement with ICBC that promotes new energy use among local enterprises.
The Risk Preventer
The central government turned its attention to risk prevention as more private lenders were accused of illegal financing and embezzlement while local governments and State-owned enterprises racked up debt.
At the financial work conference in July 2017, the central government demanded that local governments take more responsibility for preventing financial risks and pledged to grant local financial regulatory departments more power to aid these efforts.
Financial governors could help meet these demands. “To be frank, I have a very clear idea of the nature, the target and the rules of financial operations, and the relationship between financial departments. Although I have not worked with the local government long, I know its mission and responsibility [to prevent financial risk],” Tan Jiong said at a meeting with investors in Guizhou Province’s bond market in October.
Just one month after he was appointed to deputy governor, Tan led a team to Shanghai to promote Guizhou government bonds. At the meeting with investors, he detailed how the provincial government would help build a safe and healthy financial environment that focused on improving the credit system.
Media praised his efforts to restore investor confidence in Guizhou, which in 2018 had debt amounting to over 63.7 percent of the province’s GDP, official data showed.
According to Zheng Chunrong, deputy director of the Institute of Public Policies and Management, Shanghai University of Finance and Economics, financial governors have the advantage of strong connections and relationships with financial organizations, but he also warned against the potential abuse of these relationships.
“Financial governors have to balance between development and risk prevention,” he told news journal Nanfengchuang.
Yin Yong shared this view at the 2018 China Wealth Management 50 Forum, saying that local governments are still being challenged by the contradiction between development and supervision since development is more visible and measurable in the short term. He suggested that the central government further guide and unify the rules, and that local governments set up separate systems to handle management and risk.
Works Both Ways
Many return to the financial sector after serving local governments. According to statistics from the 21st Century Business Herald, 12 financial governors appointed before 2017 have since returned to working at financial organizations. For example, Jiang Chaoliang, who transferred from the PBoC to the Hubei provincial government in 2002, left after two years to serve as president of the Bank of Communications. He later was president of the DBC and the ABoC, and governor of Jilin Province. He is now Party secretary of Hubei Province, the highest provincial-level position.
Similarly, Guo Shuqing, now vice president of the PBoC, has experienced two such shifts between financial organs and local governments. He served as deputy governor of Guizhou from 1998 to 2001 and governor of Shandong from 2013 to 2017. In between, he worked with several banks as well as SAFE and the CSRC.
In 2005, Guo published Between Surplus and Poverty, a collection of his papers and reports from 1991 to 2001. The book, according to Ba Shusong, provided a good reference for dealing with the difficulties in implementing economic reforms.
“The experience of working with local governments has enabled [Guo] to think from both local and national perspectives... He can think about problems of economic transition systematically and approach them more practically,” Ba said in 2015.
He Haifeng, director of the Financial Policy Institute, Chinese Academy of Social Sciences agreed. “With experience in local governments, financial officials can think in a broader way once they return to financial organizations. This is one reason the central government promoted talent exchanges between the financial sector and local governments,” he told NewsChina.
Old Version
