Kristian Rouz — Mainland China's government in Beijing will reportedly nominate ex-IMF official Zhang Tao as the People's Bank of China's (PBOC) deputy governor, according to a report by Caixin magazine. The move, if confirmed, would pave the way for Zhang to become one of the IMF's deputy managing directors, thus allowing mainland China to solidify its role in the Fund, whilst achieving greater integration of the PBOC into the global central banking system.
If appointed as PBOC deputy head, Zhang would replace the current IMF Deputy Managing Director Zhu Min. The incumbent Chinese representative, Zhang would significantly enhance his nation's role in global lending as he possesses veteran experience with the IMF. Zhu's term ends in July.
Zhang had previously worked as executive director for mainland China at the IMF, and if appointed as the sixth deputy governor at PBOC, he would become eligible for the positon in the highest ranks of the IMF. PBOC sources say, Zhang would be a better fit than Zhu because of his past experience with the IMF and his familiarity with the Fund's routine.
Previously, the speculation was Chen Yulu, previously of Renmin University, would replace Zhu. Yet, as Beijing is seeking a greater role in the IMF decision-making, Zhang seems like a better fit. According to the IMF statement, the next developments on Zhu's replacement would be communicated to Beijing in due course, whilst Chinese authorities have abstained from commenting on the matter.
Aside from his IMF involvement, Zhang worked for the World Bank in 1995-1997, and, subsequently, for the Asian Development Bank in 1997-2004, whilst also having served within the PBOC rankings.
Second, mainland China has a massive issue with a growing number of bad loans in its domestic credit market, mainly due to its unprecedented debt imbursement in 2010-2015 undertaken by provincial governments and corporations. Therefore, external involvement in debt restructuring might be vital at some point, meaning an improvement in China's positioning within the IMF could provide a long-term solution.
Some observers suppose that Zhang's alleged nomination might reflect Beijing's intent to tighten its grip on the IMF as a reflection of the nation's growing weight in global economy, with Chinese policymakers seeking ways to use their funds in global projects via the IMF framework. Even though that might also be the case, the mounting burden of structural problems and the ongoing economic slowdown amidst falling competitiveness against the nations of Southern and Southeast Asia suggest both China and the IMF have a mutual interest in expanding a comprehensive dialogue.
In other words, other central banks want to make sure mainland China will not attempt sudden monetary policy moves, such as impromptu renminbi devaluations similar to that in August 2015, whilst China seeks opportunities to expand its global investment, as well as to attract credit to finance its costly structural reforms.