China’s new money man once fixed a crisis. He may need to again

Pan owes his ascent to “competence and a rare level of technical expertise, because he doesn’t appear to have any political backing from higher-ups,” said Andy Chen, a senior analyst at Trivium China, a Beijing policy consulting firm.

But Pan’s lack of a power base within the Communist Party may be offset by his commanding the top two spots at the central bank. Since 2018, the party secretary was Guo Shuqing, who was a full member of the party’s powerful Central Committee. The central bank governor has been Yi Gang.

Economic policy continues to be dominated by Vice Premier He Lifeng, who is a longtime ally and close friend of China’s top leader, Xi Jinping. He has overseen industrial policy and economic planning for the last seven years. This year he was given added responsibility for international trade and finance, and he is expected to gain further clout over the domestic financial system as well.

Yet just surviving as a senior financial official in China these days is an accomplishment, as waves of corruption investigations have felled numerous leaders. Pan’s ability to avoid legal trouble while overseeing the currency reserves is particularly notable given the agency’s troubled history.

A director of the foreign currency agency in the 1990s, Zhu Xiaohua, was sentenced soon after to 15 years in prison for corruption during a subsequent posting as a bank executive, although he was later released on bail. Zhu’s successor, Li Fuxiang, was abruptly hospitalised in 2000 and died when he fell from a seventh-floor hospital window.

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The foreign currency agency was thrown into turmoil again in 2015, when the central bank devalued China’s currency with scant initial explanation.

Beijing pushed down the value of its currency for technical reasons, and not because of financial distress. But the Shanghai stock market had crashed two months earlier and the devaluation so alarmed investors that China spent nearly $US1 trillion in the ensuing months to stabilise the currency.

Pan halted the yuan’s decline with stringent capital controls. He may be called on to act on the currency again in his new job. China’s Politburo on Monday endorsed a continued emphasis on preserving a stable value for the yuan.

Pan’s stringent controls in 2016 on money flows out of China reversed more than a decade of efforts by Chinese policymakers to make the yuan a globally traded currency that other central banks and big companies would want to hold.

But some financial policymakers say Pan had little choice at the time, since restricting money from leaving China was part of a broader trend by Beijing of ever greater government controls on the economy.

“He was an administrator, a key one to be sure, administering policies from atop,” said Mark Sobel, who was the deputy assistant secretary of the US Treasury for international monetary and financial policy from 2000 to 2015.

Pan does not come from an elite Communist Party family like Zhou Xiaochuan, who was the central bank’s governor and Communist Party secretary from 2002 to 2018. He also is not a former economics professor at an American university, like the governor for the past five years, Yi Gang. In fact, early in his career, Pan turned down an acceptance to attend Harvard’s Kennedy School of Government, staying instead in China and helping the two banks where he worked to prepare for their initial public offerings.

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People who know Pan, who turned 60 this month, describe him as a workaholic who is meticulously detail oriented. He is known to mark up memos from subordinates to correct their grammar.

He grew up in Anqing, a flood-prone town on the Yangtze River in central China’s Anhui province. In the 1980s, he earned a bachelor’s degree in accounting at Zhejiang Metallurgical Economics College and taught there.

His career began picking up speed when he moved to Beijing in 1987 to earn a master’s degree in labour relations at Renmin University followed by a doctorate in economics and later a year at Cambridge University from 1997 to 1998.

And Harvard? He finally went there in 2011. But it was only for a couple of months — not a degree program that might have deepened his understanding of the United States but would have kept him far from China’s centre of power in Beijing.