Zhou Xiaochuan, Beijing’s central radical banker

In the early 1980s, a promising PhD student from a prominent political family caught the eye of China’s most senior Communist leaders by urging them to lift price controls and allow imports of televisions.

Three decades later Zhou Xiaochuan, China’s longest-serving central bank governor, is still convincing the country’s authoritarian leaders of the merits of economic reform. In persuading them this week to devalue the currency, he may have pulled off the crowning achievement of his long career — by preparing the way for a free-floating renminbi that can challenge the US dollar as the world’s reserve currency.

The People’s Bank of China’s announcement on Tuesday that it had devalued the renminbi against the dollar by nearly 2 per cent overnight — the biggest fall since 1994 — caught markets by surprise and raised the prospect of a so-called currency war. Mr Zhou presented the move internally to President Xi Jinping as a matter of national interest, necessary to boost the economy at a time when growth is slowing sharply. To the outside world, the PBOC portrayed the devaluation as a step toward a more market-oriented and freely tradable Chinese currency. He hoped this would prevent competitive devaluations while also convincing the International Monetary Fund to include the renminbi in a basket of reserve currencies.

The ability to make his reforms palatable to both global markets and Communist party stalwarts marks him as a brilliant technocrat at the height of his political powers, even as he prepares to retire. Although he is often referred to as China’s Alan Greenspan, the position of central bank governor is far less influential in the People’s Republic than in the US. Big decisions such as raising or lowering interest rates are decided by party leaders. But, as with most posts, it is the person who bestows power on the position rather than the other way round.

Mr Zhou, like Mr Xi and many other senior leaders, is a “princeling”, as the children of senior party members are known, and this gives him influence that goes well beyond his official title. He was born in 1948, one year before the establishment of the People’s Republic. His father was an early member of the Communist party and its secret service in the second world war, and later vice-minister of machinery.


Beyond official biographies, the personal details of senior Chinese leaders are considered state secrets and, apart from the fact that he is married to a senior former official in the ministry of commerce legal department, little of his private life is known publicly.

The younger Zhou graduated from an elite Beijing high school in 1966; and, when the Cultural Revolution began that year, he was a leader in one of the vicious Red Guard groups that persecuted teachers, “bad elements” and “capitalist roaders”, according to two people familiar with the matter. Any-one who has met him in the past few decades finds it hard to believe this avuncular, urbane and scrupulously polite man could have been involved in the violent excesses of that period.

In 1968, like millions of other rebellious youngsters, Mr Zhou was sent to a state farm in the frigid far northeast, where he kept his spirits up in four years of exile by listening to banned classical music records. When his father was rehabilitated in 1973 he was allowed to return to Beijing and embark on a life in academia. In the 1980s he studied briefly in the US and, on his return, joined a group of young technocrats in Beijing pushing to open up to the west.


Mr Zhou’s political star really began to rise when President Jiang Zemin, a former protégé of his father, came to power in 1989. He served as head of a string of organisations, including the China Securities Regulatory Commission, where he was known as Zhou “Bapi” — the Flayer — because of attempts to crack down on corruption in nascent capital markets. Again, his titles did not reveal his true influence. He has been instrumental in establishing China’s equities markets in the early 1990s, in bailing out and restructuring banks in the late 1990s, overhauling equity markets in the early 2000s and nurturing the bond market since then.

A regular at meetings of the IMF, he charms westerners with his coruscating intelligence, fluent English, sense of humour and mean tennis game. Hank Paulson, former US Treasury secretary, credits Mr Zhou with convincing him to take the job in 2006 after he had already turned it down. But the traits that make him palatable to western elites have often worked against him at home, where he is accused of being too liberal, too “foreign” and too close to the US.

His imminent political demise has been wrongly reported multiple times— at least twice by the Financial Times — since he became central bank governor in 2002, and he has been the subject of campaigns by overseas Chinese-language media alleging everything from insider trading to selling China’s banks to foreigners on the cheap. In 2010, the PBOC was forced to publish pictures of Mr Zhou meeting foreign dignitaries in Beijing in the wake of rumours he had defected to America to avoid punishment for losses on US Treasury bonds.

“It is clear he sometimes pisses people off, including President Xi,” says Christopher Johnson, a former senior China analyst at the CIA now at the Center for Strategic and International Studies in Washington. “But he has never been so important or so powerful. He is going to retire soon so has nothing to lose and he is absolutely determined to achieve the market reforms he has committed most of his life to.”


Jamil Anderlini is the FT’s Beijing bureau chief