China central bank head to spur reforms via tough waters

Zhou Xiaochuan reappointed central bank chief

Zhou Xiaochuan's grey hair identifies the Chinese central bank chief as someone willing to do things a bit differently to the ranks of bureaucrats with dyed-black hair in Beijing's other top organs of state - and the struggle he faces getting things done.

Zhou, who took control of the People's Bank of China in 2002, is the architect of broad financial reforms that have spawned fledgling capital markets, liberalised some interest rates and broken the peg between China's yuan and the US dollar - a step along the path to turning it into a global currency on a par with the greenback.

But formidable challenges lie ahead, as the country has entered a stage where big changes face push-back risks from vested interests, especially from state giants in key sectors.

"The reform task for Zhou will be very arduous and it may not even be completed during his tenure," said Xu Hongcai, senior economist at China Centre for International Economic Exchanges, a top government think-tank in Beijing.

His tenure was given an unorthodox extension on Saturday by China's newly installed political chiefs - headed by President Xi Jinping and Premier Li Keqiang - in what is seen as a bid to burnish the pro-reform credentials of the new Communist leaders.

Zhou, 65, is at the mandatory retirement age for cabinet-ranked officials, such as central bank governor. But his election as a deputy chairman of parliament's top advisory body on March 11 gave him "national leader" status and cleared the way for Zhou to stay on at the PBOC.

That makes Zhou not only the longest-serving central bank chief since the establishment of the People's Republic of China in 1949, but among the longest-serving in the world.

On the other hand, it does nothing to reduce the scale of the battle he must fight - to make China's interest rate and currency regimes more market-driven and to open up the restricted capital account - that is seen as full of pitfalls by political hardliners and vested interests alike.

Expanding capital markets would end subsidised access to funds for state firms while expanding investment options beyond the real estate market that local government officials have for years used to fund pet projects and boost promotion prospects.