China Names New PBOC Policy Committee Members Focused on Jobs

(Bloomberg) -- China appointed two new economists to its central bank monetary policy committee with expertise in the labor market and population, suggesting an increased focus on boosting jobs and household incomes.

Cai Fang, a well-known economist at the government-linked Chinese Academy of Social Sciences, and Wang Yiming, a former deputy director of the Development Research Center of the State Council, will join the People’s Bank of China’s policy making committee, according to a government statement released Saturday.

Liu Wei and Ma Jun, who have been on the committee since 2018, will leave their posts, in line with standard practice which sees expert members of the panel replaced after three years, according to state media. Ma was an outspoken former managing director and China economist at Deutsche Bank AG, and his public statements such as a recent warning on asset bubbles often moved financial markets.

Chinese leaders have been downplaying the economic growth target, placing emphasis instead on the need for more jobs in the economy to boost incomes. Premier Li Keqiang said at the conclusion of the National People’s Congress earlier this month that the government will prioritize employment creation as it sets a target of 11 million new urban jobs for 2021.

Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong noted the main research backgrounds of the two new MPC members were in the fields of population and labor economics and regional industrial policy.

“Ensuring employment could be the focus of monetary and other macro policies for a period of time to come,” he said. “I expect the monetary policy going forward will better incorporate goals of supporting the real economy and structural transformation of society.”

Liquidity Support

China’s central bank is not independent from the government. The monetary policy committee plays an advisory role, with its suggestions for major decisions requiring approval by the State Council, a top government body, before being implemented. Descriptions of committee meetings are less detailed than those provided by other major central banks such as the U.S. Federal Reserve.

The reshuffle comes as the People’s Bank of China prepares to dial back the monetary stimulus pumped into the pandemic-hit economy last year, with officials worried about the build-up in debt and risks of asset bubbles. The PBOC has said it wants to balance providing support for growth while reducing financial risks, a pledge that Governor Yi Gang reiterated Sunday.

The central bank still has room to pump liquidity into the economy while keeping the debt ratio stable, Yi said in a speech at the China Development Forum in Beijing. Yi’s comments helped to stabilize equity markets after a selloff at the end of last week, with the the CSI 300 Index climbing as much as 1.3% on Monday.

Income Boost

Cai often speaks on demographic issues and improving incomes. In a February speech, he said China “must take measures to promote adequate and high-quality employment” to ensure household incomes grow in line with GDP growth.

Wang is currently vice president of the China Center for International Economic Exchanges, a think tank under the government’s top economic planning body, the National Development and Reform Commission.

Speaking at a government-hosted conference on Saturday, Wang forecast annual growth of 5% to 5.5% over the next five years and said economic policy should remain supportive of the recovery.

“Considering the structural unevenness in the economic recovery, and the fact that small businesses still face challenges, macro policies will maintain necessary intensity to provide support to the recovery,” he said.

Policy Communication

The PBOC had been trying to improve communications with the outside world since 2015, when its opaque policy process was blamed for worsening a stock market sell-off. Ma’s departure from the committee suggests the bank is retreating from that effort, said Bo Zhuang, chief China economist at TS Lombard.

“Ma’s departure, with Cai and Wang’s academic background, implies PBOC’s research and policy focuses have shifted inwards’ Zhuang said.

Ma had previously called for the MPC to be given “autonomy and full independence in making key monetary policy decisions,” according to a jointly-authored article published last year. “Specifically, give the mandate of policy rate decisions to the MPC, with a predetermined schedule for its meetings,” the article said.

Liu Shijin, who was one of the three expert members on the MPC since 2018, will retain his position. Liu, who has previously spoken at events such as the World Economic Forum in Davos, proposed China create a new set of economic targets -- with employment being the top priority and GDP growth being the least important, according to an interview he gave to local media in February.

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With assistance from Bloomberg