Exclusive Insight: China's new finance minister and central bank governor

US Air Force Pilot Takes High-Altitude Selfie with Chinese Surveillance Balloon; U.S. Considers Release of Intelligence on China’s Potential Arms Transfer to Russia; China to Shake Up Financial System

Welcome to today's issue of The China Brief! In today's news, a US Air Force pilot photographed a Chinese surveillance balloon floating below their U-2 spy plane. The picture was released by the Defense Department on February 22 and quickly circulated on social media. A day after the photo was taken, another Air Force pilot shot down the balloon off the South Carolina coast with an AIM-9X Sidewinder missile. This incident has further worsened the already tense relations between Beijing and Washington.

In other news, the Biden administration is considering releasing intelligence showing that China is considering supplying weapons to support Russia's war in Ukraine. This potential move by China comes amid escalating tensions between Beijing and Washington over the Western campaign to pressure Russia, which launched a full-scale invasion of Ukraine in February 2022.

Chinese leader Xi Jinping is preparing to shake up the leadership of the country’s financial system, installing key associates to run the central bank and reviving a Communist Party body to tighten political control over financial affairs. The moves continue to reshape the world’s second-largest economy.

And here’s today’s Exclusive Insight:

Exclusive: Selection of China's new finance minister and central bank governor

The new chairman of the China Banking and Insurance Regulatory Commission (CBIRC) is highly likely to be the current chairman of the China Securities Regulatory Commission (CSRC), Yi Huiman. He is the only central committee member of the financial sector at present and is originally from Cangnan, Wenzhou, Zhejiang. Yi is a close fellow townsman of Li Qiang and has worked his way up from various positions at the Industrial and Commercial Bank of China to become its Chairman, and subsequently became Chairman of the CSRC. Yi is very familiar with the commercial banking system. He is known for his acumen and emotional intelligence. People who have interacted with him describe him as someone who seldom smiles or speaks.

The new governor of the People's Bank of China (PBOC) is highly likely to be Zhu Hexin. Zhu, originally from Nantong, Jiangsu, is a specialist who has worked his way up from the Nanjing Branch of the Bank of Communications to become Vice President of the Bank of Communications. After the 18th Congress, Zhu's career took the fast track. He successively served as Deputy Secretary-General of the China Banking Regulatory Commission, Deputy Secretary of the Sichuan Provincial Party Committee, Deputy Director of the People's Bank of China, and Chairman of Citic Group in 2020. Zhu Hexin has worked in joint-stock commercial banks, state-owned banks, local governments, central banks, and state-owned financial groups.

It is worth mentioning that Zhu Hexin is an alternate member of the 20th Central Committee. At the same time, the People's Bank of China is a ministry-level institution that requires a central committee member to serve as a leader.

As things stand, the new chairman of the China Securities Regulatory Commission is likely to be Wu Qing, the current Executive Deputy Mayor of Shanghai, based on his qualifications. Wu worked at the CSRC early on in his career and later moved to Shanghai, where he worked under Li Qiang's leadership.

However, one issue is that Wu Qing is also an alternate member of the Central Committee, not a full member. The CSRC, as a ministry-level institution, also requires a Central Committee member to serve as a leader. A possible arrangement would be for Wu Qing to take over as chairman, and at some point in the future, the CSRC would be merged into the CBIRC for the unified supervision of all financial institutions.

Liu Kun, the current Minister of Finance, was a classmate of He Lifeng at Xiamen University. As things stand, there are two possible candidates for the new Minister of Finance.

One is Lu Zhiyuan, an alternate member of the 20th Central Committee and the current Deputy Secretary of the Shandong Provincial Party Committee and Party Secretary of Qingdao. He is originally from Shaanxi and previously served as Deputy Director of the Xi'an Finance Bureau.

The other is Meng Fanli, also an alternate member of the 20th Central Committee and the current Deputy Secretary of the Guangdong Provincial Party Committee and Party Secretary of Shenzhen. He is from Shandong and was a professor of accounting at the Shandong University of Finance and Economics. He previously served as Deputy Director of the Shandong Provincial Finance Department.

Liao Min, currently ranked first among the deputy ministers, was born in 1968 and was formerly the secretary of Liu Mingkang, the former chairman of the China Banking Regulatory Commission. He followed Liu all the way and also served as the director of the Shanghai Banking Regulatory Bureau, where he dealt with micro-level financial risks. Later, he served as the director of the International Bureau (Division Four) of the Central Leading Group for Financial and Economic Affairs under Liu He and has been the Deputy Minister of Finance for five years since then.

It is unknown whether it is because of the strong imprint of his former superiors on him or for other reasons, but Liao Min did not get elected as a Central Committee member or alternate member of the 20th National Congress. It is unclear whether he will remain at the Ministry of Finance or return to the relatively familiar CBIRC.

(This article was written by Lao Zong, an expert analyst for The China Brief)

Bloomberg: US Air Force Pilot Takes High-Altitude Selfie with Chinese Surveillance Balloon

A photo taken by a US Air Force pilot from the cockpit of a U-2 spy plane on February 3 shows a Chinese surveillance balloon floating below. The picture was released by the Defense Department on February 22 and quickly circulated on social media as a high-altitude "selfie." The balloon was part of a Chinese mission to fly across the US, which worsened already tense relations between Beijing and Washington.

A day after the photo was taken, another Air Force pilot shot down the balloon off the South Carolina coast with an AIM-9X Sidewinder missile. President Joe Biden stated that the aircraft was "gathering information over America," while Chinese officials claimed it was a weather balloon gone astray. The US Navy has since ended its search for debris.

WSJ: U.S. Considers Release of Intelligence on China’s Potential Arms Transfer to Russia

The Biden administration is considering releasing intelligence showing that China is considering supplying weapons to support Russia's war in Ukraine. Western nations have recently picked up intelligence that Beijing might end its previous restraint on weapons supplies to Russia, although it appears that China hasn't made a final decision yet. The potential confrontation with China over lethal aid comes amid escalating tensions between Beijing and Washington over the Western campaign to pressure Russia, which launched a full-scale invasion of Ukraine in February 2022.

WSJ: China to Shake Up Financial System as Xi Jinping Installs Key Associates

Chinese leader Xi Jinping is preparing to shake up the leadership of the country’s financial system, installing key associates to run the central bank and reviving a Communist Party body to tighten political control over financial affairs, according to people familiar with the discussions. The moves are a continuation of efforts by Mr. Xi to reshape the world’s second-largest economy.

Zhu Hexin, chairman of the Chinese financial conglomerate Citic Group Corp., is the leading candidate to succeed economist Yi Gang as governor of the People’s Bank of China, the people said. He Lifeng, a longtime associate of Mr. Xi who is set to become a vice premier overseeing economic, financial and industrial affairs, is likely to take a concurrent post as the PBOC’s party chief. The new PBOC leadership will need to lead the central bank through a turbulent time in China, helping the economy get back on its feet following the scrapping of most zero-Covid restrictions and dealing with the worst property downturn on record to safeguard financial stability.

Nikkei Opinion: China's Growth Revival Depends on Internal Market Reforms

Diana Choyleva, Chief Economist of Enodo Economics, discusses the need for China to tackle its internal protectionism to boost consumer spending and ensure a sustained economic recovery. While Beijing has plans to create a unified national market to break down domestic market barriers, more needs to be done to free up the internal market, boost household disposable income, and address the causes of excess savings. A more open and competitive domestic market would lower costs and increase choice for consumers, boosting their real incomes and desire to spend.

SCMP: China spells out concern over Japan’s semiconductor controls, asks for a fair and predictable business environment

During an economic partnership consultation with Japan, China's commerce ministry expressed concern over Japan's moves to control semiconductor exports, stating that China hopes Japan will provide enterprises with a fair, non-discriminatory, and predictable business environment. The two sides also discussed macroeconomic situations, industry supply chains, and potential cooperation in the green technology and healthcare sectors, as well as exchanged views to prepare for a high-level economic dialogue between the two countries. Japan and the Netherlands agreed to comply with export restrictions against China’s chip sector announced by the US government in October.

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