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Where Is China’s Central Bank Chief?

In China and elsewhere, there is increasingly intense speculation as to why Zhou Xiaochuan, the highly acclaimed governor of the People’s Bank of China, has for months been silent about the renminbi, the ailing Chinese currency. His silence and absence is most unusual and apparently prompted IMF Managing Director Christine Lagarde to chide Beijing at Davos last month for the government’s inadequate communication with financial markets.

Zhou, notably, stayed away from the central bank’s August 13 press conference, held just two days after the shock devaluation of the yuan, as the Chinese currency is informally known. Though he appeared at a G-20 finance meeting in Ankara in early September, he has since vanished. That he skipped Davos, raised eyebrows.

Central bankers are, of course, expected to be front and center when their currencies are under pressure, as the renminbi has been since mid-August. But as Hong Kong’s South China Morning Post noted Sunday, “no one’s seen or heard from Zhou.”

There are various theories that account for the Zhou’s absence. Jonathan Fenby, the author, journalist, and co-founder of Trusted Sources, believes that Xi Jinping, the Chinese ruler, has consolidated decision-making in his own hands. Accordingly, senior officials, Zhou among them, have been cut out of the loop. If Fenby’s correct, it is likely that Zhou is either prevented from speaking or perhaps chooses to remain silent rather than challenge Xi’s policies with which he might disagree.

Scott Kennedy of the Center for Strategic and International Studies, the Washington, D.C. think tank, shares this view. “As policymaking becomes more centralized, there is less internal discussion and consensus-building,” he said to the Post.

Another theory is that China’s Communist Party—the country’s first and only permitted authority—has yet to decide on a strategy for dealing with the substantial pressures and attacks on China’s currency, coming from within and from outside the country. In this case, neither Zhou nor anyone else would speak in public before a consensus and a decision would be reached.

There’s a bigger story here, however. In recent weeks, especially as China’s economic problems have unfolded, analysts have questioned the competence of China’s technocratic leadership, which not long ago was universally admired.

Zhou, the longest-serving central bank chief in the G-20, is without question, able. His long record of achievement strongly suggests that his absence and silence, and the evident government missteps, cannot be attributed to incompetence on his part. Rather, they have much to do with an inept political system and culture that constrains capable officials.

Whatever is the truth—and it is difficult to know—markets are waiting for Zhou to emerge from the shadows. He may not have sufficient answers for China’s increasingly intractable financial problems, but his engagement is becoming a precondition to a return to confidence in China.

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