The Long March To Openness

China’s once-cloistered central bank is becoming more communicative.

It was the only lender in Mao Zedong’s era, taking orders from the top to control the flow of money through the command economy. Now, even after decades of financial liberalization, the People’s Bank of China has its hands on far more levers than other global central banks as it works to keep the nation’s 40-year growth streak humming along.

From its imposing headquarters in Beijing’s Xicheng District, the PBOC relies on a number of tools to direct the flow of liquidity in the $40 trillion-plus financial system. The seven-decade-old institution channels cash to development banks that finance the government’s pet projects and leans on commercial banks when it needs to make it easier or harder for companies and people to borrow. The PBOC has also amassed one of the largest troves of reserves in the world, a $3 trillion horde that’s chock-full of U.S. Treasuries.

Now, as China is poised to greatly expand foreign companies’ access to its capital markets, the once-cloistered central bank is opening up, too. As part of the march toward greater transparency, PBOC Governor Yi Gang granted Bloomberg News a rare interview on June 7. The 61-year-old economist said one of his top goals “is to make my monetary policy more transparent, so that the whole society and the world can have the right expectations.”

A good portion of the 35-minute discussion touched on a topic that’s also commanding the attention of Yi’s peers at the Federal Reserve and the European Central Bank: the role of central banks in supporting growth amid an escalating confrontation between Washington and Beijing.