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  • 21 Aug, 2019

  • By, Wikipedia

China Central Bank
The People's Bank of China (officially PBC and unofficially PBOC) is the central bank of the People's Republic of China. It is responsible for carrying out monetary policy as determined by the People's Bank Law and the Commercial Bank Law.

The PBC was established in 1948 and became China's sole central bank after the founding of the People's Republic of China in 1949. From 1969 to 1978, the PBC was demoted to a bureau of the Ministry of Finance. The PBC was extensively reformed during the 1990s, when its provincial and local branches were abolished, instead opening nine regional branches. In 2023, these reforms were reversed as when the regional branches were abolished and the provincial branches restored, and new arrangements essentially ended the PBC's longstanding role in financial supervision.

The PBC is the 25th-ranked of 26 ministerial-level departments of the State Council, right ahead of the National Audit Office. The PBC lacks central bank independence, and is required to implement the policies of the Chinese Communist Party (CCP) under the direction of the party's Central Financial Commission. The PBC is led by a Governor assisted by several Deputy Governors and a CCP Committee Secretary. Since 2023, the roles of Governor and CCP Committee Secretary have been held jointly by Pan Gongsheng.

History

Mao era

The bank was established on December 1, 1948, based on the consolidation of the Huabei Bank, the Beihai Bank and Northwestern Farmers' Bank. The headquarters was first located in Shijiazhuang, Hebei, and then moved to Beijing in 1949. Between 1950 and 1978 the PBC was the only bank in the People's Republic of China and was responsible for both central banking and commercial banking operations. All other banks within mainland China such as the Bank of China were either organized as divisions of the PBC or were non-deposit taking agencies.

From 1952 to 1955 government shares were added to private banks to make state-private banks, until under the first Five Year plan from 1955 to 1959 the PBC had complete control of the private banks, making them branches of the PBC, closely resembling the vision of Vladimir Lenin. With aid from the Soviet Union, the shares of private enterprises and with them industrial output followed a similar path, forming a Soviet-style planned economy.

During the Cultural Revolution, the PBC suspended its commercial banking service. In June 1969, the State Council approved the consolidation of PBC's headquarters as a bureau within the Ministry of Finance. In that context, the PBC's head office was downsized to no more than eighty staff. Local PBC branches were correspondingly merged into local government finance departments.

Early reform era

The institutional demotion of the PBC was reversed in March 1978 as it was separated from the Finance Ministry and granted ministerial ranking.

By then and with the exception of special allocations for rural development, the monolithic PBC dominated all business transactions and credit. In 1979, China initiated a transition from that single-tier banking system to a two-tier system, which was largely completed by 1984. In March 1979, as part of the Chinese economic reforms, the State Council split off state-owned banks from the PBC, first the Agricultural Bank of China (ABC) and the Bank of China (BOC). The People's Construction Bank of China, which had been run separately under the Ministry of Finance, was also made autonomous (and later renamed China Construction Bank in 1986). In January 1984, the PBC's own commercial banking operations were spun off as the Industrial and Commercial Bank of China (ICBC). In September 1983, the State Council had promulgated that the PBC would function exclusively as the central bank of China and no longer undertake commercial banking activities.

Modernization efforts continued in the late 1980s and early 1990s. In 1990, the PBC moved into its new head office building, prominently located on West Chang'an Avenue. In 1991, vice governor Chen Yuan spearheaded the creation of the Electronic Interbank System (EIS), the PBC's first state-of-the-art financial market infrastructure. In 1992, however, the PBC had to reluctantly concede the spinning off of its securities regulatory duties to the newly established China Securities Regulatory Commission, whose first chair was former PBC vice governor Liu Hongru.

The bank's profile was greatly raised by the appointment of Zhu Rongji as its Governor in 1993, simultaneously as his role as Vice Premier in charge of economic and financial affairs.. Its central bank status was legally confirmed on March 18, 1995, by the 3rd Plenum of the 8th National People's Congress, and was granted a higher degree of autonomy than other State Council ministries by an act that year. In 1996 and 1996, the PBC established fundamental regulations on loans and consumer credit.

In 1998, the PBC underwent a major restructuring. All provincial and local branches were abolished, and the PBC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries. The nine branches were located in Chengdu, Guangzhou, Jinan, Nanjing, Shanghai, Shenyang, Tianjin, Wuhan, and Xi'an, complemented by a sub-provincial network of city-level and county-level sub-branches. That same year, the so-called credit plan, a key feature of China's former state planning process, was finally abandoned, allowing the PBC to play a genuine role as monetary policy authority.

21st century

In 2003, the Standing Committee of the National People's Congress approved an amendment law for strengthening the role of PBC in the making and implementation of monetary policy for safeguarding the overall financial stability and provision of financial services. That year, the long overdue restructuring of China's banking sector made major progress with the creation of Central Huijin Investment, a PBC-managed fund that allowed the PBC to take the lead from the Ministry of Finance on the restructuring process and from the CCP Central Organization Department on the appointment of senior bank executives. That same year, however, the PBC reluctantly lost its direct authority over banking supervision with the creation of the China Banking Regulatory Commission.

In 2005, the PBC elevated its branch in Shanghai to the status of "second head office", in a move intended to mirror the prominent market-facing role of the Federal Reserve Bank of New York within the US Federal Reserve System. In 2006, the PBC established the Credit Reference Centre to provide financial credit reporting. In 2008, the PBC lost the direct ownership stakes it had built up in much of China's financial sector as the ownership of Central Huijin was transferred to the China Investment Corporation (CIC), a newly created sovereign wealth fund.

During the Great Recession, the PBC helped address bank liquidity crisis by signing swap agreements with numerous other countries to provide them with liquidity based on the renminbi. As of 2021, China has swap agreements with 40 countries.

In 2010, the PBC issued administrative measures regarding online non-financial payment services. These measures retroactively recognized the legal status of online third-party payment platforms like Alipay. Prior to the 2010 measures, these services existed in a legal grey area.

In 2015, the PBC hosted China's first formal deposit insurance scheme. In 2019, this scheme was reorganized as a subsidiary of the PBC, the Deposit Insurance Fund Management Company. Meanwhile, in 2017, the PBC was tasked with the secretariat of China's newly established Financial Stability and Development Committee chaired by Vice Premier Liu He. In 2020, the PBC initiated supervision of significant financial holding companies.

The PBC underwent through another major restructuring in 2023, with the abolition of the nine regional branches established in 1998, which had already seen their authority watered down by a change in 2004 that had returned authority to the PBC's branches at the provincial level and further changes in 2018. Additionally, the PBC's county-level branches were absorbed by city-level branches. The new branches were inaugurated on August 18, 2023. The oversight over financial holding companies and financial consumer protection was also transferred from the PBC to the newly established National Financial Regulatory Administration (NFRA). Around 1,600 county-level branches of the PBC are planned to be absorbed to the NFRA; the PBC had 1,761 such branches at the end of 2021.

Management

See also: Governor of the People's Bank of China

The PBC is a cabinet-level executive department of the State Council. The top management of the PBC are composed of the governor and a certain number of deputy governors. The governor is nominated by the premier of the State Council, who is then approved by the National People's Congress or its Standing Committee and appointed by the president.The deputy governors of the PBC are appointed to or removed from office by the premier.

The PBC adopts the governor responsibility system under which the governor supervises the overall work of the PBC while the deputy governors provide assistance to the governor to fulfill his or her responsibility. The current governor is Pan Gongsheng. Deputy governors of the management team include: Zhu Hexin, Zhang Qingsong, Xuan Changneng, Lu Lei, and Tao Ling.

The PBC does not have central bank independence and is politically required to implement the policies of the Chinese Communist Party (CCP). It operates under the direction of the CCP's Central Financial Commission. The CCP committee secretary of the PBC is the most powerful position in the bank and can hold more sway than the governor. The current CCP committee secretary is Pan Gongsheng.

Structure

People's Bank of China Tianjin branch, formerly the Central Bank Tientsin Branch building until 1949, now a protected heritage site

The PBC has branches in each 31 provincial-level administrative divisions in China, branches in five cities (Shenzhen, Dalian, Ningbo, Qingdao, and Xiamen), and 317 branches in prefecture-level divisions. It has 6 overseas representative offices (PBC Representative Office for America, PBC Representative Office (London) for Europe, PBC Tokyo Representative Office, PBC Frankfurt Representative Office, PBC Representative Office for Africa, Liaison Office of the PBC in the Caribbean Development Bank).

The PBC Monetary Policy Committee is an advisory body chaired by the PBC governor. It typically includes the directors and deputy directors of other financial agencies, as well as a few influential academic economists.

Departments

As of 2019, the PBC consisted of functional departments (bureaus) as below:

  • General Administration Department (General Office of the CCP PBC Committee)
  • Legal Affairs Department
  • Monetary Policy Department
  • Macroprudential Policy Bureau
  • Financial Market Department
  • Financial Stability Bureau
  • Statistics and Analysis Department
  • Accounting and Treasury Department
  • Payment System Department
  • Technology Department
  • Currency, Gold and Silver Bureau
  • State Treasury Bureau
  • International Department
  • Internal Auditing Department
  • Human Resources Department (Organization Division of the CCP PBC Committee)
  • Research Bureau
  • Credit Information System Bureau
  • Anti-Money Laundering Bureau (Security Bureau)
  • Financial Consumer Protection Bureau
  • Education Department of the CCP PBC Committee
  • CCP Committee of the PBC Head Office (Office of Inspections)
  • Retired Staff Management Bureau
  • Office of Senior Advisors
  • Staff Union Committee
  • Youth League

The following enterprises and institutions were directly under the PBC as of 2012:

The PBC is active in promoting financial inclusion policy and a member of the Alliance for Financial Inclusion.

Head office

The PBC building in 2006

The head office building of the PBC, on West Chang'an Avenue, was constructed in 1987–1990 on a design by a team of architects led by Zhou Ru. While its materials are modern, its shape refers to two traditional Chinese motifs, namely yuanbao ingots and "wealth vases" (Chinese: Jùbǎopén) from Chinese folklore.

See also