Chinese Central Banking: Removing the little emperors
It has taken almost two decades of reform but the People's Bank of China (PBOC) believes 1999 will at last see it join the ranks of the world's independent central banks. The big revamp, long-awaited and finally announced towards the end of last year, involves replacing the bank's provincial-level structures with nine regional entities which will answer only to Beijing.
The aim is to boost the central bank's independence and eliminate interference by provincial and city governments through overhauling its management structure along the lines of the US Federal Reserve. Central bank governor Dai Xianglong said at the opening of the Shanghai regional branch: "This [change] will aid the central bank in exercising its authority over monetary policy and maintaining its independence in financial supervision."
Beefing up the bank's autonomy is a major reason for the revamp. The central bank has long suffered interference from the political muscle wielded by provincial authorities regardless of the central government's repeated attempts since 1979 to free the national banking system from local politics. The bank's local officials were often put under enormous pressure to deviate from Beijing's policies and to provide funds for pet projects.