Deng ally loses post as head of central bank

STEPHEN VINES

Hong Kong

Zhu Rongji, who was inaccurately described by China-watchers in the West as ''China's Gorbachev'', has been replaced as governor of the country's central bank, the People's Bank of China. He retains the post of vice- premier and other economic responsibilities.

The move, endorsed by China's parliament yesterday, appears to be part of the power struggle now under way in anticipation of the demise of the Chinese patriarch, Deng Xiaoping, and sends mixed signals over control of the economy.

Mr Zhu, 66, a former mayor of Shanghai, was a protege of Mr Deng who ensured that control of the economy was concentrated in his hands both to combat rampant inflation and to bring tougher controls over money supply.

He gained a reputation as a liberal reformer among China- watchers although there was little evidence to support this. The real distinction between Mr Zhu and the mass of incompetent officials who ran the central bank was that he favoured modernisation and a tougher approach to the credit lines freely extended to near-bankrupt state industries.

His tough approach earned him influential enemies throughout the country. Six months after assuming the governorship of the bank in July 1993, Mr Zhu said, with splendid understatement : ''Since we implemented macro- controls over the economy, the post of People's Bank of China Governor has become extremely unpopular.''

His blunt, no-nonsense approach did little to mollify his opponents. In recent months President Jiang Zemin has been deflecting complaints about Mr Zhu and bringing in one of his proteges, the new vice-premier Wu Bangguo, as a part of the core economic team.

Although Mr Jiang and Mr Zhu know each other well from their time in Shanghai, Mr Zhu is not regarded as a full member of the so called ''Shanghai gang'' of supporters Mr Jiang is putting together to reinforce his position once Mr Deng dies.

Mr Zhu was known as ''one-chop Zhu'' when he ran Shanghai, China's largest city, denoting the way he centralised and speeded up authorisation for new projects. In contrast, Mr Jiang's period of controlling Shanghai was characterised by bureaucratic indecision.

Mr Zhu's successor as bank governor is Dai Xianglong, one of his allies and a current bank vice-governor, indicating that the government is not looking for a profound change of policy. However Mr Dai, 50, is more junior in the Communist Party hierarchy and will not be able to throw his weight around in the way that got Mr Zhu into trouble.

Although the outgoing governor made some impression on economic problems, the scale of his task precluded quick results. Inflation, which peaked at almost 26 per cent late last year, is coming down but still rages at around 20 per cent in major cities.

The supply of credit, which in part fuelled the inflationary trend, has been curbed but Chinese banks remain awash with bad debt from ailing state enterprises and are forced to keep throwing good money after bad.

Mr Zhu's stewardship of the economy is also credited with both raising and stabilising the value of the currency and with replenishing state reserves. He was responsible for the passage of two important bank reform laws which had the effect of decentralising the banking system, giving greater autonomy to the banks and detaching the state from responsibility for all their debts. However, he made little progress on opening the domestic banking sector to eager foreign investors.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Photographer / Floorplanner / Domestic Energy Assessor

£16000 - £25000 per annum: Recruitment Genius: A Photographer/ Floor planner /...

Ashdown Group: Front-End Developer - Surrey - £40,000

£30000 - £40000 per annum: Ashdown Group: Front-End Developer - Guildford/Craw...

Recruitment Genius: Customer Service Assistant

£13500 - £15000 per annum: Recruitment Genius: A Customer Service Assistant is...

Recruitment Genius: Sales Executive - OTE £35,000

£16000 - £35000 per annum: Recruitment Genius: An ambitious and motivated Sale...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence