Chinese Central Bank Plans to Restore Provincial Branches in Structural Overhaul

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The People’s Bank of China (PBOC) plans to implement a far-reaching overhaul of the nationwide management structure that has been in existence for two decades according to sources speaking to Caixin.

PBOC’s current structure consists of two operations offices in Beijing and the southwestern metropolis of Chongqing, as well as nine regional branches, over 300 municipal sub-branches and mores than 1,000 county-level sub-branches.

According to sources from PBOC a proposed structural change will see the nine regional branches abolished before the end of the year, to be replaced with branches in each of China’s provinces.

The Chinese central bank hopes that this will enable it to better address the broad range of economic conditions across the country’s more than 30 province-level administrative units.

PBOC implemented a system of provincial branches until 1998, when it decided to establish a system of nine regional branches that is more akin to the structure of the US Federal Reserve.

Each of the nine regional branches is responsible for several provinces, which is a structural feature intended to shore up the independence of monetary policy.

After 1998 many of the erstwhile provincial branches were converted into lower-level sub-branches under one of the nine regional branches.

Complaints about PBOC’s nine-branch system have long abounded, however, with sources from the central bank telling Caixin that the branches find it difficult to produce unified policy given that their remit encompasses several provinces.

According to one source the regional branches have “existed in name only” since May 2004, when the central bank made sub-branches in the provincial capitals responsible for the execution of monetary policy and supervision of financial markets.

Another reform under consideration is the transfer of PBOC’s county-level work force – which accounts for over 50,000 of the central bank’s nearly 140,000 employees, to the China Banking and Insurance Regulatory Commission (CBIRC).

The reforms arrive following far-reaching changes to China’s financial regulatory framework in 2018, including the merger of the banking and insurance regulators, the expansion of PBOC’s authority to include the drafting of key regulation and the implementation of macro-prudential policy, as well as the appointment of Yi Gang as governor to replace Zhou Xiaochuan.

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