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(Bloomberg) — (This story was originally published on July 29, 2023. In September 2024, People\u2019s Bank of China Governor Pan Gongsheng announced an unprecedented stimulus blitz to support the economy.)By his early twenties, Pan Gongsheng\u2019s ambition had already propelled him from a farming village in eastern China to a prestigious Beijing graduate school, where he translated books from English \u2014 despite never having been abroad.<\/p>\n
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\u201cAmong our classmates, we all thought Pan was impressive because he didn\u2019t have a great college degree,\u201d remembers Liu Xin, a Renmin University professor who studied with China\u2019s new central banker in the 1980s. \u201cBut he had English skills outstanding enough to translate a book. We all thought it wasn\u2019t an easy feat.\u201d<\/p>\n
Pan has since made a career out of exceeding expectations. In the 21st century\u2019s first decade, as a state bank executive he twice captained initial public offerings that set a world record, boosting global investor confidence in China and earning himself a reputation as a \u201cfinancial rock star.\u201d<\/p>\n
He later managed the nation\u2019s $3 trillion pile of foreign reserves and helped oversee efforts to rein in debt-laden property firms \u2014 designing the \u201cthree red lines\u201d policy that fueled a wave of financial distress at developers including China Evergrande Group.<\/p>\n
Then his career seemed to near an end. At a major leadership congress last year the technocrat was removed from the Communist Party\u2019s elite Central Committee, an inner web that\u2019s included every central bank governor since at least the 1990s. Analysts took that as a sign the bookish Pan, who has few known political connections, had been sidelined during President Xi Jinping\u2019s reshuffle.<\/p>\n
This month, he proved them wrong. Pan, now 60, was appointed governor of the People\u2019s Bank of China, uniting that role with the party chief title for the first time since Zhou Xiaochuan held both in 2018. He\u2019s now firmly in charge of the institution tasked with steering the world\u2019s second-largest economy through a growth slowdown and safeguarding the $60 trillion domestic financial system \u2014 although his lack of Central Committee membership could diminish his political sway.<\/p>\n
Pan\u2019s mission comes as China confronts fears its growth miracle is ending. The nation is teetering on the brink of deflation, its vast property market is shrinking and business confidence is waning. All that\u2019s happening as the population shrinks and geopolitical tensions with top trade partners sizzle.<\/p>\n
\u201cThree or six months ago Beijing\u2019s rumor mill would tell you maybe he was not the frontrunner\u201d<\/p>\n
\u201cThree or six months ago Beijing\u2019s rumor mill would tell you maybe he was not the frontrunner,\u201d said Fred Hu, founder of Chinese investment firm Primavera Capital, who worked with Pan during the IPOs. \u201cBut in the end, the top leadership made the right decision to pick a guy who clearly has all the qualifications at a critical juncture for our country.\u201d<\/p>\n
He added: \u201cPan has the knowledge, expertise, skillset, experience, and proven track record to do that job.\u201d<\/p>\n
Read more on Pan Gongsheng and the PBOC:<\/p>\n
China Central Bank Governor Comes With Hawkish Track Record<\/p>\n<\/li>\n
China Names Pan as Central Bank Governor to Revive Economy<\/p>\n<\/li>\n
Yi Gang Ends PBOC Governor Tenure Marked by Restrained Policy<\/p>\n<\/li>\n<\/ul>\n
Dark Horse<\/p>\n
Pan was born to farmers in a remote nook of Anhui province, in eastern China, according to Hu. After studying and teaching economics at a junior college in neighboring Zhejiang, in 1987 he enrolled at Renmin University, whose alumni include China\u2019s former economic czar, Liu He, and current ambassador to the US, Xie Feng.<\/p>\n
After graduating in 1993 with a PhD in economics, he landed a job in the Industrial & Commercial Bank of China\u2019s real estate credit department. Pan also joined another organization that year: the China Democratic League, one of eight non-Communist political groups that work alongside the ruling party. Known for attracting intellectuals, mostly drawn from the education, cultural and science sectors, Pan\u2019s memberships suggests a desire to connect with like-minded academics over networking in the ruling party.<\/p>\n
By 1999, that had seemingly shifted. Pan signed up to the Communist Party, considered a prerequisite for any big career in the state sector, and began to climb the ladder. By 2006, he was playing a leading role in restructuring the state lender and taking it public in Hong Kong and Shanghai for nearly $22 billion \u2014 then a world record.<\/p>\n
During that period, Pan was a \u201ctask master,\u201d says Hu, a former Greater China head of Goldman Sachs Group Inc., who worked with him at ICBC. The trained economist took daily logs of investment bankers\u2019 office hours and pored over the ICBC deal prospectus picking out spelling errors, according to media reports.<\/p>\n
His dedication paid off: Four years later, he helped the Agricultural Bank of China top ICBC\u2019s offering, nudging it over the $22 billion mark \u2014 another world record for a public offering. The successful IPOs, and the structural reforms they required to reassure global investors, showcased Pan\u2019s flair for navigating international markets.<\/p>\n
More than that, the deals boosted global confidence in China\u2019s banking sector, helping it stand up to global competition in the critical test years after China joined the World Trade Organization in 2001.<\/p>\n
As China\u2019s economy liberalized and global connections deepened, Pan broadened his own horizons. In 2011, he spent a semester at the Harvard Kennedy School as a New World Fellow, a program designed to encourage collaboration between the US and Chinese leaders. Anthony Saich, an international affairs professor at Harvard University who oversaw the fellowship during Pan\u2019s time, said he was smart, engaged and \u201cvery interested in questions related to global affairs and finance.\u201d<\/p>\n
\u201cOne thing I was concerned about with Yi Gang stepping down was there would be limited global expertise and knowledge of the financial world outside of China\u201d in the PBOC, Saich said. \u201cPan\u2019s appointment should address that concern.\u201d<\/p>\n
Pan\u2019s Policy<\/p>\n
Pan\u2019s return from America brought more success. In 2012, he joined the PBOC as a deputy governor, and then in 2016 became head of the State Administration of Foreign Exchange, the nation\u2019s foreign exchange regulator. But those roles came with some of China\u2019s thorniest economic issues.<\/p>\n
His first year at SAFE brought a major crisis. The central bank\u2019s shock devaluation of the yuan in 2015, as a result of exchange rate fixing reform, had caused panic in the markets and heavy outflows. Pan responded by imposing capital controls, a move that defied China\u2019s previous years of financial opening and risked isolating the domestic economy, but has since been credited with stabilizing crucial reserves.<\/p>\n
Pan\u2019s next big challenge recalled his early years at ICBC, as he became a dominant player in the campaign to rein in highly indebted property developers. For decades, Chinese developers had borrowed aggressively as housing demand boomed, turning the sector into a major pillar of the economy, even though speculation surged and prices soared to unfordable levels.<\/p>\n
Once again, Pan pushed a tough stance set by senior officials, in 2020 designing the so-called \u201cthree red lines\u201d policy, according to people familiar with the matter. Those stringent curbs on developers\u2019 financing contributed to the default of firms including China Evergrande Group, and a persistent slump of the property industry that\u2019s still weighing on the economy.<\/p>\n
\u201cThree or six months ago Beijing\u2019s rumor mill would tell you maybe he was not the frontrunner\u201d<\/p>\n
During that period, Pan met Evergrande\u2019s chairman Hui Ka Yan at least twice, according to people familiar with the matter, as he tried to prevent the developer\u2019s woes from bleeding across the financial system.<\/p>\n
As things became more critical in 2022, Pan promoted a 16-point plan of financial support measures, showing he\u2019s flexible at executing a constantly shifting policy stance set by senior officials. Those policies have yet to turn around the weakening market. An economic policy meeting of Xi\u2019s top decision-making Politburo this month suggests that more decisive easing measures are coming, including from the PBOC.<\/p>\n
With experiences contending with some of the toughest challenges in the economy under his belt, Pan will now be relied on to implement strategies identified by senior officials to address critical issues, as the world looks to China to reinvigorate the economic growth that powers global markets.<\/p>\n
\u201cThe choice of Pan to lead the PBOC reflects his ability to address problems identified by top leaders without overstepping political boundaries,\u201d said Neil Thomas, a fellow at the Asia Society Policy Institute\u2019s Center for China Analysis.<\/p>\n
\u201cPan is a proven problem-solver and Xi has more and more financial problems that he needs to solve.\u201d<\/p>\n
(This story was originally published on July 29, 2023. In September 2024, People\u2019s Bank of China Governor Pan Gongsheng announced an unprecedented stimulus blitz to support the economy.)<\/p>\n
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