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Monday, November 22, 2004

A reader recently made a good defence of Liu Mingkang as the head of CBRC. I agree that Liu is the better person for the job, but Shang Fulin, who according to rumor will replace Liu, is perhaps a more savvy political player.

Reader:
- Liu Mingkang has only been in post since April 2003, that's only 18months,
- Most players in the financial realm agree that he has achieved considerable work. Governor of Fujian would not really be a promotion. One explanation if he does leave is that he has been too bold in this reforms.
- The Communist Party Plenum, usually a period of appointments and staff turnover, has already passed, and no announcement has been made.
- The appointment has not been leaked to the official press in English(China Daily).
- Shang Fulin has not been popular with Chinese financial markets. His tenure has been marked by a lack of activism, and rumours of his departure were greeted with a sharp rise in stocks.
To make it short, I do not see why the Chinese leaders would want to shoot themselves in the foot with such a move... Do they consider Liu is goingtoo fast? What is your view?

Me:
I completely agree with your reasoning. By economic logic, Liu is the best man for the job. However, things in the world of Chinese politics operate strangely. First, it is by no means certain at this point that Liu will be moved toFujian. As you pointed out, it is still a rumor. However, I asked around in Beijing two weeks ago, and it is still the word among both Chinese officials and western journalists there. The word is that they are waiting for Shang Fulin to finish his training course at the Central Party School. Also, if you have looked at the RMRB, they are now just beginning to make a series of rotations both at the central and provincial level, so it would not be surprising if a rotation in the financial sector is made in the next month or so.

Also, I would not underestimate Shang Fulin. He is a very good political player within the Chinese government. He seldom talks to the Western press, which is actually an asset. But his guanxi with all the other economic ministries are quite good. Although not a technical economist like Zhou Xiaochuan, he is well-respected in the official circle for his in-depth understanding of the banking sector. Although I agree that he is not as good as Liu, the leadership thinks Shang is much more politically reliable, which is important in China.

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