China 'removes' foreign exchange agency chief, replaces him with central bank deputy governor

Mr Pan Gongsheng (left) will replace Mr Yi Gang as the head of China's State Administration of Foreign Exchange.
Mr Pan Gongsheng (left) will replace Mr Yi Gang as the head of China's State Administration of Foreign Exchange.PHOTO: BLOOMBERG

SHANGHAI (AFP/REUTERS) - China has "removed" the head of its foreign exchange agency, the government said on Tuesday (Jan 12), following turbulence in the yuan currency caused by what some analysts have called a policy blunder.

Mr Yi Gang, the head of the State Administration of Foreign Exchange (Safe), will be replaced by Mr Pan Gongsheng, a deputy governor of the central People's Bank of China (PBoC), according to a statement on the central government's website.

No reason was given for the moves.

Safe, which operates under the central bank, is responsible for studying and proposing policies on foreign exchange, according to its website.

The Chinese authorities guided the yuan currency down by setting its daily fix lower for eight sessions to last Thursday, representing a 1.4 percent fall, before reversing on Friday.

The move raised worries of a creeping devaluation, echoing moves in mid-August when China moved the yuan down nearly five percent over a week, saying the drop was a result of reforms aimed at making the unit more flexible.

The latest weakness has sparked worries China is pursuing a currency war to help boost its exports.

It was unclear whether Mr Yi, who had been administrator of Safe since 2009, had been sacked. He holds another post as deputy governor of the central bank, on whose website he was still listed on Tuesday.

Mr Pan, 52, has been a central bank deputy governor since 2012, and was previously a vice-president of the Agricultural Bank of China and had a role at Industrial & Commercial Bank of China , the country's largest lender, before taking his position at the PBoC, according to his biography posted on the central bank's website.

He has a PhD. in economics from China's Renmin University.

Mr Yi, a renowned economist who has a PhD from the University of Illinois, was named the top forex regulator in 2009. He will remain a deputy governor of the central bank as well as vice-minister of the Office of the Central Leading Group on Financial and Economic Affairs.

Analysts do not expect the appointment will have a significant impact on China's foreign exchange policy, which is overseen by the central bank. Safe is officially an arm of the People's Bank of China.

"Pan's appointment shouldn't have too much of an impact because Safe is more a management body rather than a decision-making body," said Mr Zhou Hao, senior emerging markets economist for Asia at Commerzbank AG, adding Safe's purview is focused on managing capital inflows and outflows, selling and buying FX, bank regulation and management of FX reserves.

"The power to make decisions is much more in the hands of the People's Bank of China or even higher organisations."

On Tuesday, the central bank fix for the yuan was little changed at 6.5628 to US$1. At 4.30pm local time, the yuan was quoted at 6.5750, slightly stronger than Monday's level at the same time.

But the rate at which banks charge each other to borrow yuan offshore in Hong Kong surged to a record high Tuesday, with China's central bank thought to be buying huge amounts of the unit to fend off speculators.