PBoC’s new deputy governor determined to get risk management right

On 27 March, the State Council of China appointed Tao Ling as the deputy governor of the People’s Bank of China (PBoC), marking the return of female leadership to the central bank after nearly a decade since the departure of Hu Xiaolian for Exim Bank in 2015.

Ling, who served as the director at the Secretariat of the Financial Stability and Development Committee under the State Council from 2019 to 2024, brings a wealth of experience and insight to her new role at PBoC. Her appointment is seen as strategic move to enhance China’s financial stability and risk management, and a breakthrough for gender equality.

Effective regulation through informed leadership

Tao’s academic background in financial stability, asset management, and financial holding companies has established her as a respected scholar. Her research, published in journals like China Finance, addresses critical issues such as systemic risk measurements, regulation coordination, and comparative international analyses.

One of her significant regulatory achievements is the Asset Management (AM) New Guidance—Guiding Opinions on Regulating the Asset Management Business of Financial Institutions, which she has championed. Before the introduction of this guidance in 2018, China’s asset management sector was plagued by risky practices such as collateralised repos and “tunnel business” operations that involved non-standard equity and real estate investments. These practices often circumvented the real economy.

Tao was instrumental in reshaping this landscape by prohibiting these practices and limiting complex transaction layers to enhance financing efficiency. This shift not only protected retail investors from unsustainable financial products but also fostered a more transparent and regulated financial environment.

Despite these successes, challenges remain. Tao’s promotion signals China’s continued determination to tackle significant financial risks, including issues arising from divergences in interest environments between the US Dollar and the Renminbi, and the implications for China’s property market.

As China undergoes major economic restructuring, Tao’s ability to recalibrate the country’s risk appetite and implement prudent, data-driven financial stability measures will be crucial. The economy faces various pressures, from declining birth rates to fluctuations in commodity prices, and the public’s hesitancy to engage in higher consumption despite economic stimuli.

The effectiveness of Tao’s leadership in navigating these complexities will ultimately determine the success of her tenure as deputy governor. Her background and previous initiatives suggest a promising direction, but the evolving economic landscape will present a continuous test of her capabilities and strategies.