Thursday, September 16, 2004

So, someone emailed to ask whether I thought Liu Mingkang or Shang Fulin made a better head of the Central Banking Regulatory Commission (CBRC). In my previous posting, I suggested that Shang is better off as head of CBRC. I did not say that Shang would be a better head of CBRC than Liu was(is). In fact, that is certainly not the case, at least not from a western market-oriented perspective. In internal minutes of the PBOC monetary policy committee from 1997 to 1999, Liu consistently championed more prudent lending practices and conservative monetary policy, while Shang favored policy compromise with the other agencies. At that time, both men served as vice-governors of the PBOC and served on the PBOC monetary policy committee, which discussed monetary and banking policy. Shang was more apt to "take the overall situation into account," i.e. order state banks to lend in support of Zhu Rongji's growth targets. I think this gave Shang a lot of staying power, since he is considered a cooperative official in the State Council.

If his past record is any indication--and I believe it is--, we canexpect another cooperative stint at the CBRC. Shang will still push very hard for the BOC, CCB ipo's since they are now the showcase events forthe government. However, we will likely see more policy coordination between CBRC and the SDRC and perhaps the MOF to accomplish policy objectives set out by the Premier and Huang Ju. If these objectives conflict with banking regulation, he is more likely than Liu to sacrifice independent banking.

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