Central bank' Pan is promoted to lead Party Committee, could boost yuan: analysts
Published: Jul 02, 2023 07:13 PM
A view of the PBC building in Beijing Photo: VCG

A view of the PBC building in Beijing Photo: VCG

Pan Gongsheng, deputy governor of the People's Bank of China (PBC) and head of the State Administration of Foreign Exchange (SAFE), has been appointed as the secretary of the central bank's Party Committee, the central bank said on Saturday.

The new appointment comes as the Chinese yuan has experienced growing volatility against the US dollar recently. Market analysts believe Pan's professional background and rich banking experience will help boost market confidence in the yuan.

Pan delivered a speech at the Lujiazui Forum in Shanghai on June 8. During the speech, Pan said that "we have confidence, conditions, and capabilities to maintain the stable operation of the foreign exchange market."

Although there have been fluctuations in the yuan's exchange rate, the forex market has operated smoothly, Pan noted, adding that exchange rate market expectations and China's cross-border capital flows have remained relatively stable.

"Over the years, we have accumulated a lot of experiences in dealing with external shocks, and we have got more macro-prudential policy tools to manage the foreign exchange market," Pan said.

In October 2018, Pan delivered a strong message to the short sellers of the Chinese yuan during a press conference. 

"In recent years, the PBC and SAFE have accumulated rich experience and policy tools in dealing with exchange rate and foreign exchange market fluctuations … We have crossed paths with those who attempt to short the yuan a few years ago, and we are familiar with each other. I believe our memories are still fresh," Pan said.

As Pan assumes his new role, his strong statements against short sellers and his professional background will help bolster market confidence, analysts said.

Hong Yong, an expert at the digital real economies integration Forum 50, told the Global Times on Sunday Pan's previous remarks showed his determination to maintain stable operations in the foreign exchange market.

His professional background and experience will allow him to formulate and implement appropriate policy measures to support the stability of the yuan, Hong said.

Pan has served as PBC deputy governor for more than 10 years, overseeing various areas including foreign exchange, statistics, research, financial markets, financial market stability and other fields, reported.

Prior to his appointment as deputy governor of the PBC in 2012, Pan had extensive experience in commercial bank management, having been involved in the restructuring, reform, and listing of Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC).

Chen Jia, an independent analyst on international strategy, told the Global Times on Sunday that Pan's appointment is in line with market expectations.

Pan's resume shows he has extensive professional knowledge and experience in the yuan's counter-cyclical management, the market-based exchange rate formation mechanism with two-way fluctuations, regulation of offshore and onshore yuan markets, macro-prudential financial supervision, and innovation in China's macroeconomic monetary policy, Chen added.

On Wednesday, the onshore yuan to US dollar exchange rate fell below 7.25, while the offshore yuan dropped to 7.2692, both reaching new lows since November 2022.

Although some foreign media are bearish on the yuan, the stable operation of China's foreign exchange market still has a sound foundation due to the upward trend of the Chinese economy and abundant policy tools, analysts said.

The yuan exchange market is expected to maintain stable operation, Chen said.

The PBC still has ample market-based exchange rate adjustment tools including the counter-cyclical moves. In addition, China still has substantial foreign exchange reserves, Chen said.