In the summer of 1944, more than 700 policymakers from 44 countries met for more than two weeks at a plush hotel in Bretton Woods. They had a single purpose: to shape a new financial world order.
The rural location was picked to make sure that participants could avoid distractions as they planned for post-war reconstruction.
China’s Bretton Woods moment could be said to have happened rather later, perhaps in September 1985. At the time, Deng Xiaoping’s reforms were showing signs of stagnating. The economy was facing runaway inflation and hardliners had attacked the reformers for pushing the country towards what was being termed as bourgeois liberalisation.
The economic planners arranged an “international exchange” to help resolve some of the intellectual disputes. A group of World Bank officials and foreign scholars, including Scottish economist Alec Cairncross and Nobel laureate James Tobin, were invited to join senior regulators from China on a six-day cruise on the S.S. Bashan down the Yangtze River.
The Bashan was even more secluded than the Mount Washington Hotel in Bretton Woods. And by the time the boat docked at Wuhan, the passengers had reached consensus on many of the country’s economic challenges.
“The Bashan Cruise Conference let us know what macroeconomic management was and what China should be doing at that moment,” the People’s Daily noted of the event some years later.
Just like at Bretton Woods, some of the delegates from the Bashan cruise would later become important financial regulators in their own right, including two future finance ministers in Xiang Huaicheng and Lou Jiwei, as well as Tian Yuan, who set up China’s first futures firm in 1992.
The youngest among the 80 or so onboard, however, was a 29 year-old graduate student called Guo Shuqing. Today Guo is not only one of China’s top financial technocrats but also an influential politician who has governed one of its richest provinces. And last month, he was named the Party boss of both the central bank and the newly created banking-insurance regulator, unprecedentedly holding the two titles at the same time.
So what is the background of this “financial super regulator”? Guo was born in Inner Mongolia in 1956, though he is of Han Chinese ethnicity. He was the third of seven siblings. According to Yema Caijing, a new media firm founded by a group of financial journalists, Guo’s father was persecuted during the Cultural Revolution and died. His mother raised her children with “a paltry income” while Guo himself was ‘sent down’ to toil at a production commune in Siziwang Banner.
“Before 2004 Siziwang Banner was nothing but a desert of yellow sand,” Yema Caijing wrote in an article last month.
In 1977, when entrance exams for universities were resumed, Guo’s superior scores saw him enrol to study philosophy at Nankai University in Tianjin. This nearly impossible achievement – students in Inner Mongolia needed vastly superior scores to be admitted to top colleges in the major cities – made him the most famous student in Siziwang Banner.
Guo brought his hard-working style with him to Tianjin, where he was given the nickname “Mongolian ox” by his classmates.
In 1982 Guo furthered his studies at the Chinese Academy of Social Sciences, receiving a doctoral law degree in 1988. After spending two years doing field research in Inner Mongolia and Shanxi, he penned a thesis “Exploring the Reform of China’s Economic Institutions” and sent it directly to the State Council as a proposal.
This caught the attention of senior cadres, earning the then-28 year-old Guo a precious ticket to the Bashan Cruise Conference a year later.
The cruise helped the Chinese attendees make connections with academics from foreign institutions. Guo would set off for Oxford University in 1986 and spend a year there as a visiting researcher.
“Guo is one of the most fluent English speakers among officials of his generation, which would make him an effective communicator when facing international markets, ” a Beijing source told the South China Morning Post last year.
Upon his return from Oxford as a haigui (or returning ‘sea turtle’), Guo joined the State Planning Commission and then the State Commission for Economic Restructuring (both predecessors of the National Development and Reform Commission).
In 1998, he left the State Council to become the vice governor of Guizhou, but three years later he returned to Beijing and joined the People’s Bank of China.
Time outside the capital gave Guo a view of some of the conflicting priorities of the central government versus the local provinces.
“Guo needed to deal with two entirely opposite problems. That was the excessive liquidity nationwide against the poverty of inner western China,” a correspondent claimed on Wallstreet.cn.
Guo was to receive plenty more training in the skill of wearing two very different hats. In 2005 when state banks were cleaning up their non-performing assets, he was appointed chairman of China Construction Bank (CCB).
And in the same year he was named Party boss of China Cinda, one of the bad banks created to absorb the soured loans of the main state lenders. Guo would hold both posts for the next four years, overseeing a period when the banks were growing their loan books at record pace.
In 2011, he was promoted to head the China Securities Regulatory Commission (CSRC). By then he had already established a name for himself as a strong reformer but Guo pushed the reputation to an extreme at the CSRC, where he introduced some 80 policy directives during his first 17 months at the helm. Among the priorities was moving to stop chronic insider trading and reducing barriers for foreign investors (see WiC366).
“As a top stock market regulator, Guo Shuqing cemented a reputation as an economic reformer,” the New York Times wrote last year. “It earned him the occasional nickname Whirlwind Guo.”
Having spent only 17 months as the CSRC boss, Whirlwind Guo moved on. He was dispatched to govern the coastal province of Shandong. This looked to be a demotion at first glance but Guo’s second departure from central government turned out to be a blessing in disguise: he escaped the political crossfire after the chaotic stock market meltdown of 2015 (see WiC288).
Instead he polished his resume with another round of provincial experience. All of which makes him unique among senior politicians, given he has now governed a very rich province, a very poor one, run the stock market watchdog and helmed a major bank.
Last year Guo was appointed chairman of the China Banking Regulatory Commission (CBRC). A few months later, at the 19th National Party Congress, he was elected as one of the 200 or so members of the Central Committee, the decisionmaking body of China’s ruling Communist Party.
“As the CBRC chairman Guo would be given the all-important task of cleaning up the Chinese banking sector while avoiding an economic hard landing,” Beijing News suggested.
That verdict seems accurate. Last year when Xi Jinping launched a wholesale reshuffle of senior government positions (see WiC402), there was news that the CBRC was to be combined with the insurance regulator CIRC (creating the CBIRC), with Guo become the new bancassurance watchdog’s chairman and Party boss.
A week later, it was announced that Guo would also become Party boss (and one of the vice governors) of the Chinese central bank.
Yi Gang, a long-time friend and colleague of Guo, will succeed Zhou Xiaochuan as the PBoC governor later this year, although as Party secretary, Guo effectively outranks governor Yi at the central bank.
“Guo as the Party secretary [of the PBoC] might take up more coordination works. This will allow Yi Gang more time to focus on setting monetary policies,” Beijing News predicted last month.
In a gathering this week Guo also chaired a meeting of the CBIRC, and reaffirmed that he will focus on reducing debt levels at local governments and state-owned enterprises, and curtailing the rapid rise in household debt.
Guo will also continue the crackdown on shadow banking in the insurance sector, which has already included investigations into the former CIRC boss (see WiC362) and led to the arrest of the chairman of high-profile Anbang.
Chinese media outlets had been circulating reports that Xi Jinping would create a new “super regulatory body” combining the PBoC with the CSRC, CBRC and CIRC. In fact, the reshuffle turned out to be a little less expansive, although analysts still see it as another move by Xi to strengthen the Party’s control over the leading agencies under the State Council.
The question is: will Guo live up to his reputation as a whirlwind in bringing change to the sectors that he now oversees? His dual positions mean that he will take control of the top-down drafting of new regulations at the central bank, as well as commanding the efforts to make sure that the rules are enforced, via his leadership of the CBIRC.
That puts him in a position of immense influence. Along with Liu He (see WiC400), he could become one of the dominant figures during Xi’s second term in power.
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