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
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea