(Bloomberg) — (This story originally published on July 29, 2023. In September 2024, People’s Bank of China Governor Pan Gongsheng announced an unprecedented stimulus campaign to support the economy.) By his early 20s, Pan Gongsheng’s ambition had taken him from a farming village in eastern China to a prestigious university in Beijing, where he was translating books from English despite never having been abroad.
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“Among our classmates, we all found Pan impressive because he didn’t have a great university degree,” recalled Liu Xin, a professor at Renmin University who studied with China’s new central banker in the 1980s. “But his English skills were excellent enough to translate a book. We all found it a tough task.”
Pan has since made a career of defying expectations. In the first decade of the 21st century, as head of a state-owned bank, he twice spearheaded world-record IPOs that boosted global investor confidence in China and earned himself a reputation as a “financial rock star.”
He later managed the country’s $3 trillion in foreign reserves and helped oversee efforts to rein in the debt burden of real estate companies. He designed the “three red lines” policy that unleashed a wave of financial distress among developers including China Evergrande Group.
Then his career seemed to be over. At a major leadership conference last year, the technocrat was purged from the Communist Party’s elite Central Committee, an inner web that has included every central bank governor since at least the 1990s. Analysts saw it as a sign that the bookish Pan, who has few known political connections, had been sidelined in President Xi Jinping’s reshuffle.
This month, he proved them wrong. Pan, now 60, was named governor of the People’s Bank of China, combining the role with the title of party leader for the first time since Zhou Xiaochuan held both in 2018. He now presides over the institution tasked with steering the world’s second-largest economy through a slowdown and protecting the country’s $60 trillion domestic financial system, though his lack of membership on the Central Committee could diminish his political clout.
Pan’s mission comes as China faces fears that its growth miracle is coming to an end. The country is teetering on the brink of deflation, its huge property market is shrinking and business confidence is waning. All this is happening amid a shrinking population and rising geopolitical tensions with top trading partners.
“Three or six months ago, the Beijing rumor mill would tell you he might not be the frontrunner”
“Three or six months ago, the Beijing rumor mill would tell you he might not be the frontrunner,” said Fred Hu, founder of Chinese investment firm Primavera Capital, who worked with Pan during the IPOs. “But ultimately, the top brass made the right decision by choosing a man who clearly has all the qualifications at a critical time for our country.”
He added: “Pan has the knowledge, expertise, skills, experience and proven track record to fulfil that role.”
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Dark horse
Pan was born to farmers in a remote corner of Anhui Province, in eastern China, Hu said. After studying economics and teaching at a junior college in neighboring Zhejiang, he enrolled in 1987 at Renmin University, whose alumni include China’s former economic czar Liu He and current U.S. ambassador Xie Feng.
After graduating in 1993 with a PhD in economics, he took a job in the real estate credit department of the Industrial & Commercial Bank of China. That year, Pan also joined another organization: the China Democratic League, one of eight non-communist political groups that work with the ruling party. Pan is known for attracting intellectuals, mainly from the education, culture, and science sectors, and his memberships suggest a desire to connect with like-minded academics rather than networking within the ruling party.
By 1999, that seemed to have changed. Pan joined the Communist Party, considered a prerequisite for a major career in the state sector, and began climbing the ladder. In 2006, he played a leading role in restructuring the state-owned bank, taking it public in Hong Kong and Shanghai for nearly $22 billion — a world record at the time.
During that period, Pan was a “task master,” said Hu, a former Greater China head of Goldman Sachs Group Inc. who worked with him at ICBC. The trained economist kept daily logs of investment bankers’ office hours and pored over the ICBC deal prospectus, picking out spelling errors, according to media reports.
His dedication paid off: Four years later, he helped the Agricultural Bank of China top ICBC’s offering, pushing it past the $22 billion mark—another world record for a public offering. The successful IPOs, and the structural reforms they required to reassure global investors, demonstrated Pan’s talent for navigating international markets.
Moreover, the deals boosted global confidence in China’s banking sector, making it more resilient to global competition in the crucial testing years after China joined the World Trade Organization in 2001.
As China’s economy liberalized and its 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 foster collaboration between U.S. and Chinese leaders. Anthony Saich, a professor of international affairs at Harvard University who oversaw the fellowship during Pan’s time, said he was bright, engaged and “very interested in questions of global affairs and finance.”
“One thing I was concerned about with Yi Gang’s departure was that there would be limited global expertise and knowledge of finance outside of China” in the PBOC, Saich said. “Pan’s appointment should alleviate that concern.”
Pan’s Policy
Pan’s return from America brought more success. In 2012, he joined the PBOC as vice governor and in 2016 became head of the State Administration of Foreign Exchange, the country’s foreign exchange regulator. But those roles came with some of China’s most difficult economic problems.
His first year at SAFE brought a major crisis. The central bank’s shocking devaluation of the yuan in 2015, a result of exchange rate reform, had caused panic in markets and massive outflows. Pan responded by imposing capital controls, a move that defied China’s earlier years of financial opening and risked isolating the domestic economy, but has since been credited with stabilizing crucial reserves.
Pan’s next big challenge echoed his early years at ICBC, when he became a dominant player in the campaign to rein in highly leveraged real estate developers. Chinese developers had borrowed aggressively for decades as demand for housing grew, making the sector a key pillar of the economy even as speculation grew and prices soared to unaffordable levels.
Pan once again ushered in a tough stance from top officials, drafting the so-called “three red lines” policy in 2020, according to insiders. Those tough restrictions on developer financing contributed to the bankruptcy of companies such as China Evergrande Group and a prolonged real estate slump that continues to weigh on the economy.
“Three or six months ago, the Beijing rumor mill would tell you he might not be the frontrunner”
According to insiders, Pan met Evergrande Chairman Hui Ka Yan at least twice during that period in an attempt to prevent the developer’s problems from seeping into the financial system.
As things got more critical in 2022, Pan pushed a 16-point plan of financial support measures, showing his flexibility in implementing ever-changing policies set by senior officials. Those policies have yet to reverse the weakening market. An economic policy meeting of Xi’s top decision-making Politburo this month suggests more decisive easing measures are coming, including from the PBOC.
Now that Pan has experience tackling some of the economy’s biggest challenges, he will be confident he will implement strategies identified by senior officials to address critical issues as the world looks to China to revive the economic growth that is driving global markets.
“Pan’s choice to lead the PBOC reflects his ability to address issues identified by top leaders without crossing political lines,” said Neil Thomas, a fellow at the Asia Society Policy Institute’s Center for China Analysis.
“Pan is a proven problem solver and Xi has more and more financial problems to solve.”
(This story was originally published on July 29, 2023. In September 2024, People’s Bank of China Governor Pan Gongsheng announced an unprecedented stimulus campaign to support the economy.)
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