Abstract
This chapter gives a short overview on the history of the People’s Bank of China (PBoC), the central bank of the People’s Republic of China, and introduces its legal environment. Upon the basis of the Central Banking Law, promulgated in 1995 and amended in 2003, the chapter illustrates the following topics: the legal status of the PBoC, its objectives and tasks, its organisational structure, the independence of the Chinese central bank, the capital and instruments of the PBoC, and its reporting obligations and supervision. The PBoC developed in an environment which is most accurately described as one of managed transition, entailing the gradual transformation of the economic system and allowing a market-oriented framework slowly to grow out of the planned economy. The legal framework creates much flexibility or—from a more formal legal perspective—a particular uncertainty regarding the role of the PBoC, which advanced from a department of the Ministry of Finance to a state organ at ministerial level with growing authority within the hierarchy of the Chinese party-state. When it comes to the question of the independence of the PBoC, the prevailing opinion in the academic literature is that the Chinese central bank’s independence is in a critical situation, given its subordinate status to the State Council. Nevertheless, the rising authority of the PBoC in China has marked a significant change in Chinese monetary institutions and policy.
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Notes
- 1.
On the history of the PboC, see Wenbin Wei, The Banking Law in Transnational China: A Comparative Review in the Light of EU Banking Rules, (Zürich: Schulthess, 2005), p. 65 et seq. On the development of Chinese financial sector reforms since 1978, see Patrick Hess, “China’s Financial System: Past Reforms, Future Ambitions and Current State”, in: Frank Rövenkamp and Hanns Günther Hilpert (eds), Currency Cooperation in East Asia (Cham et al.: Springer, 2014), p. 25 et seq.
- 2.
The institutional status of the PBoC had reached a nadir in the period from 1969 to 1979, when it was relegated and absorbed into the Ministry of Finance.
- 3.
See Resolution of the State Council on PBoC specifically conducting central bank functions [国务院关于中国人民银行专门行使中央银行职能的决定], dated 17.9.1983.
- 4.
On the banking reforms in the 1980s, see, for example, Stephen Bell and Hui Feng, The Rise of the People’s Bank of China (Cambridge, MA: Harvard University Press, 2013), p. 266 et seq.
- 5.
[中华人民共和国中国人民银行法]; Chinese-English in: CCH Asia Pacific (eds.): CCH China Laws for Foreign Business, Business Regulations, Volume 1–5, Hong Kong, 1985 et seq., pp. 8–450.
- 6.
This rising stock of the Chinese central bank went hand-in-hand with the appointment of ZHU Rongji as the PBoC’s governor in July 1993, who later (in 2003) became prime minister. None of the PBoC’s governors before 1993 was a political heavyweight, which is seen as both a result and an indicator of the central bank’s actual status within the party-state. Bell and Feng (note 4 above), p. 130.
- 7.
Bell and Feng (note 4 above), p. 145. This restructuring falls in the “Jiang-Zhu Era” (1991–2005), when JIANG Zemin became General Secretary of the CCP and ZHU Rongji served as Vice-Premier (from 1998: Premier), see Hess, note 1 above, p. 26 et seq.
- 8.
“Central bank” = chin. “中央银行”.
- 9.
Compare Art. 9.1 Statute of the European System of Central Banks and of the European Central Bank (Official Journal of the European Union C 326, 26.10.2012, p. 230 et seq.): “The European Central Bank […] shall have legal personality, shall enjoy in each of the Member States the most extensive legal capacity accorded to legal persons under its law; it may, in particular, acquire or dispose of movable and immovable property and may be a party to legal proceedings.” Compare also Art. 2 Bundesbankgesetz (German Central Banking Law): “Die Deutsche Bundesbank ist eine bundesunmittelbare juristische Person des öffentlichen Rechts.” (The Deutsche Bundesbank is a federal institution with legal personality under public law.)
- 10.
See, for example, China Data Supplement of the Journal of Current Chinese Affairs, May 2011, p. 11.
- 11.
Chin. “国家机关”.
- 12.
Art. 50 para. 1 General Principles of Civil Law [中华人民共和国民法通则], dated 12 April 1986: “An organ [机关] with independent funds shall have the status of a legal person [法人资格] from its date of establishment.”
- 13.
See Dawei LI and Honghua LI [李大伟/李红华] (eds), Commentary on the Law of the People’s Republic of China on the People’s Bank of China, [中华人民共和国中国人民银行法释义], (Beijing, 2004), p. 5: “The central bank is a special financial organ with characteristics of a state organ […]; on the one hand the central bank is a bank, but it is not a general bank; on the other hand it is a state organ, but it is not a general state organ; it is a special state organ. Under these two attributes, the banking attribute is the basis and the state organ attribute is the guidance.” Compare Shengming Wang [王胜明] (ed), Commentary on the Law of the People’s Republic of China on the People’s Bank of China, [中华人民共和国中国人民银行法释义], (Beijing, 2004), p. 6.
- 14.
On the long and intense debate on the objectives of the PBoC since the beginning of the reform era, see Bell and Feng, note 4 above, p. 157 et seq.
- 15.
Ibid. But see ZHOU Zhongfei, Banking laws in China. Alphen a/d Rijn: Kluwer Law 2007, p. 5, who infers from Article 3 Central Banking Law that the objective of the PBoC is to maintain monetary stability, “and in this way promote economic growth”. Therefore, in his opinion, monetary stability is a primary objective “while economic growth is a secondary one”.
- 16.
See Hess, note 1 above, p. 36 (“Due to the social unrest that high inflation can cause—as happened in 1989—China’s leaders and the PBoC have shown a strong determination to fight inflation.”).
- 17.
Bell and Feng, note 4 above, p. 192 et seq. See, also, Tom Miller, “PBoC lifts reserve ratio as inflation rises to 8.5 per cent”, South China Morning Post, dated 13 May 2008 (“Consumer inflation on the mainland rebounded unexpectedly to 8.5 per cent last month, prompting the central bank to take immediate tightening measures and raising the prospect of faster currency appreciation to control prices.”) and Michael Pettis, “Can China avoid US pre-Depression errors?”, South China Morning Post, dated 2 February 2009 (“PBoC is not as free to manage domestic monetary policy as the Federal Reserve was in the 1930s, because its primary obligation is to manage the foreign-exchange value of the currency.”)
- 18.
Bell and Feng, note 4 above, p. 205 et seq. See, also, Eric Ng, “Beijing raises rates again to fight inflation”, South China Morning Post, dated 9 February 2011 (“The PBoC has to strike a difficult balance between fighting inflation via rate rises and fending off speculative flows into the mainland.”).
- 19.
On the separation of banking regulation from the Chinese central bank after 2003, see Bell and Feng, note 4 above, p. 147 et seq.
- 20.
Chin. “银行业金融机构”. For a definition of this term, see Article 52 Central Banking Law.
- 21.
On the administrative setting of interest rates, see Hess, note 1 above, p. 31. Hess observes that interest rates are set in favour of borrowers barely above the inflation rate, which results in a significant re-distribution of income from depositors to the rest of the economy.
- 22.
On the PBoC’s management of the exchange rate system, see Bell and Feng, note 4 above, p. 209 et seq.
- 23.
On the PBoC’s administration of the foreign exchange reserves, see Bell and Feng, note 4 above, p. 249 et seq.
- 24.
This task includes the conclusion of bilateral currency swap agreements with the central banks of other countries. For a list of such agreements concluded by the PboC, see Bell and Feng, note 4 above, p. 259. The European Central Bank and the PBoC concluded a swap agreement in October 2013; see Victoria Ruan, “People’s Bank of China in swap deal with European Central Bank”, South China Morning Post, dated 11 October 2013. Such swap agreements allow central banks to purchase and subsequently re-purchase Chinese yuan and each bank’s respective foreign currency, for example, Euro, from each other. The swap agreement between the PBoC and the European Central Bank, which will be valid for 3 years, will allow the European Central Bank to access at most 350 billion yuan while the PBoC will be able to secure as much as 45 billion Euro from its European counterpart when needed.
- 25.
Chin. “行长”.
- 26.
Chin. “副行长”.
- 27.
When the National People’s Congress is not in session, the governor is affirmed by the Standing Committee of the National People’s Congress and is appointed to or removed from the post by the President of the People’s Republic of China (currently XI Jinping).
- 28.
For a list of current deputy governors, see www.pbc.gov.cn/publish/english/953/index.html.
- 29.
See Article 11 Central Banking Law, according to which the PBoC has to “institute a system in which the governor assumes the full responsibility”. It further provides that “the governor directs the work of the PBoC and the deputy governors assist the governor in his or her work”.
- 30.
The 18 departments (bureaus) are: General Administration Department, Legal Affairs Department, Monetary Policy Department, Financial Market Department, Financial Stability Bureau, Financial Survey and Statistics Department, Accounting and Treasury Department, Payment System Department, Technology Department, Currency, Gold and Silver Bureau, State Treasury Bureau, International Department, Internal Auditing Department, Personnel Department, Research Bureau, Credit Information System Bureau, Anti-Money Laundering Bureau (Security Bureau), Education Department of the Chinese Communist Party PBoC Committee. See www.pbc.gov.cn/publish/english/969/index.html. Compare Bell and Feng, note 4 above, p. 144, who include only 14 functional departments in their chart.
- 31.
Chin. “货币政策委员会”.
- 32.
See the Regulations on the Monetary Policy Commission of the PBoC [中国人民银行货币政策委员会条例], promulgated on April 15, 1997 by the State Council; reprinted in: Wang, note 13 above, p. 246 et seq.
- 33.
See Art. 5 Regulations on the Monetary Policy Commission of the PBoC (note 32 above).
- 34.
See the list of “Members of the Monetary Policy Committee of the People’s Bank of China”, available at: http://www.pbc.gov.cn/publish/english/955/2013/20131014162143309746782/20131014162143309746782_.html.
- 35.
Article 11 Regulations on the Monetary Policy Commission of the PBoC (note 32 above).
- 36.
Article 10 Regulations on the Monetary Policy Commission of the PBoC (note 32 above).
- 37.
Article 5 paras. 2, 6, 11 Regulations on the Monetary Policy Commission of the PBoC (note 32 above).
- 38.
Compare Article 28.1 Statute of the European System of Central Banks and of the European Central Bank (note 9 above): “The capital of the ECB shall be euro 5,000 million. […]” Compare also Article 2 Bundesbankgesetz (German Central Banking Law): “Die Deutsche Bundesbank ist eine bundesunmittelbare juristische Person des öffentlichen Rechts. Ihr Grundkapital im Betrage von 2.5 Milliarden Euro steht dem Bund zu. […]”. (Its capital, amounting to 2.5 billion Euro, is owned by the Federal Republic of Germany.)
- 39.
Chin. “属于国家所有“.
- 40.
A similar problem existed until 2005 in Chinese company law: The 1993 Company Law of the People’s Republic of China provided that the “ownership of state-owned assets in a company resides with the state” (Article 4 para. 3 Company Law). With the revision of the Chinese company law in 2005 this provision was dropped without much attention being given in academia.
- 41.
Compare Article 28.4 Statute of the European System of Central Banks and of the European Central Bank (note 9above): “[…], the shares of the national central banks in the subscribed capital of the European Central Bank may not be transferred, pledged or attached.” Compare also Article 2 Bundesbankgesetz (German Central Banking Law) (note 38 above).
- 42.
See note 20 above.
- 43.
Articles 48 and 49 Central Banking Law stipulate administrative sanctions against “the person directly in charge and other persons directly liable” if the PBoC commits acts proscribed in Article 30 Central Banking Law or where the local governments, the departments of the governments at all levels, public organisations or individuals coerce the PBoC and its functionaries into providing loans or guarantee in violation of Article 30 Central Banking Law.
- 44.
Chin. “重要事项”.
- 45.
On the political relations between the PBoC and the party leadership, see Bell and Feng, note 4 above, p. 116 et seq.
- 46.
According to Article 41 para. 2 Central Banking Law, the fiscal year of the PBoC runs from 1 January to 31 December of the Gregorian calendar.
References
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Pißler, K.B. (2015). History and Legal Framework of the People’s Bank of China. In: Rövekamp, F., Bälz, M., Hilpert, H. (eds) Central Banking and Financial Stability in East Asia. Financial and Monetary Policy Studies, vol 40. Springer, Cham. https://doi.org/10.1007/978-3-319-17380-1_2
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