This book proposes a history of the Chinese central bank, the People’s Bank of China (PBC), since the beginning of the “opening and reform” period. The book tracks the growing importance of this institution in monetary policy as part of the changes at the top of the Chinese state and the Communist Party (CCP). The book is organised into two main parts. The first is a chronological presentation of changes in the PBC, distinguishing between two main periods: 1979 to 1992, and 1992 to the presen..

Ortiz, Horacio

English

OpenEdition

 
China Perspectives 
2014/3 | 2014
The Rise of Environmentalism
Stephen Bell and Hui Feng, The Rise of the People’s
Bank of China: The Politics of Institutional Change, 
Cambridge, MA, Harvard University Press, 2013, 376 pp.
Horacio Ortiz
Electronic version
URL: http://journals.openedition.org/chinaperspectives/6544
DOI: 10.4000/chinaperspectives.6544
ISSN: 1996-4617
Publisher
Centre d'étude français sur la Chine contemporaine
Printed version
Date of publication: 1 September 2014
Number of pages: 59-61
ISSN: 2070-3449
 
Electronic reference
Horacio Ortiz, « Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politics of
Institutional Change,  », China Perspectives [Online], 2014/3 | 2014, Online since 01 January 2017,
connection on 24 September 2020. URL : http://journals.openedition.org/chinaperspectives/6544  ;
DOI : https://doi.org/10.4000/chinaperspectives.6544 
This text was automatically generated on 24 September 2020.
© All rights reserved
Stephen Bell and Hui Feng, The Rise
of the People’s Bank of China: The
Politics of Institutional Change, 
Cambridge, MA, Harvard University Press, 2013, 376 pp.
Horacio Ortiz
1 This book proposes a history of the Chinese
central  bank,  the  People’s  Bank  of  China
(PBC),  since the beginning of the “opening
and  reform”  period.  The  book  tracks  the
growing  importance  of  this  institution  in
monetary policy as part of the changes at the
top of the Chinese state and the Communist
Party (CCP). The book is organised into two
main  parts.  The  first  is  a  chronological
presentation  of  changes  in  the  PBC,
distinguishing  between  two  main  periods:
1979 to 1992, and 1992 to the present. The
second part of the book is concerned with the
bank’s  major  policies,  in  particular  how it
deals with inflation, its exchange rate policy,
and regulation of the financial sector.
2 As a major institution of the Chinese financial
system, the PBC also plays a crucial role in
the global financial system. A review of its
recent  history  is  therefore  extremely
welcome.  This  book  presents  clearly  the
major regulatory and policy changes of the last 30 years, indicating their links to negotiations
within the CCP in response to domestic and global macro-economic events. 
Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politi...
China Perspectives, 2014/3 | 2014
1
3 The book’s authors, Stephen Bell and Hui Feng, are from the School of Political Science and
International Studies at the University of Queensland, Australia. Stephen Bell is Professor and
Head of the school, focusing his research on governance and institutional development, and
adopting China as a topic of research in recent years. His colleague, research fellow Hui Feng,
has been working on contemporary China’s economic transformation, with a particular focus
on the financial sector. 
4 The authors show how the PBC became an important centre of decision-making for monetary
policy in the 1990s, after then-vice-premier Zhu Rongji and other senior CCP officials used it to
foster their careers by proposing an agenda of liberal economic policy. In particular, the PBC
became the institution in charge of responding to the inflationary episodes that marked the
1980s, and during the 1990s took pre-eminence over the Ministry of Finance in conducting
monetary policy. This position was maintained and reinforced during the Hu-Wen decade, in
particular under the direction of Wen Jiabao, who had overseen financial matters with Zhu
Rongji in the past.
5 The second part of  the book shows how this rise of  the PBC occurred through specific
contingent historical events in a series of pragmatic reactions that reflected the balance of
power between different ministries and ideological sectors of the CCP. The PBC was in charge
of a battle against inflation that partly countered the interests of state-owned enterprises and
of certain ministries more inclined to use bank lending and monetary creation to foster GDP
growth. The bank was the institution that sided most strongly against the devaluation of the
RMB in the aftermath of the Asian Financial Crisis. It was also at the centre of negotiations to
relax the RMB peg to the US dollar in 2005, in particular under the governorship of Zhou
Xiaochuan. The latter, whose father had been a mentor of Jiang Zemin, was appointed by Zhu
Rongji in 2002, and continued to be in charge through the Hu-Wen decade and up until today.
6 Although some factual elements are only superficially analysed, or even wrong (the analysis of
the reform of stock markets seems to stop in 2006), the book presents a very informative
overview of the changes of the PBC in the last 30 years. The method is varied. The book is
based on secondary literature, the analysis of specific regulations, and interviews carried out
with high-ranking officials. Due to anonymity clauses, no attempt is made to situate the
declarations of the interviewees in their social context and personal strategies. Their remarks
are most often used as proof of what they assert, without further critique. 
7 The main theoretical framework of the book, spelled out in the introductory chapters, is
concerned with the literature of institutional change. The authors debate the theories of path-
dependence, the idea that institutions command individuals’ behaviour, and settle for what
they call a “nuanced view” according to which individuals are constrained by organisational
rules but also have margins of play and creativity within the historical contingencies and
ideological environments in which they operate. In spite of the long introductory chapter
discussing theories of institutional change, the main question asked by the book is framed by
two theoretical presuppositions that are never tackled explicitly by the authors. The question
is expressed in the first three pages. The book seeks to account for the rise of the PBC as part
of the attempt to “build a sound market-oriented monetary and financial infrastructure”
within a “transitional (and thereby immature) financial system” in the context of a “post-
communist transition” common to “developing countries.” The authors ask, “How are we to
explain the Bank’s rising authority within the steep hierarchy of the Chinese party-state,
where the party elite has traditionally guarded its monetary and financial policy autonomy?
Our answer is that the rise of the PBC has been based on a relationship of growing mutual
dependency  with  the  party  leadership”  (all  quotes  above pp.  3-5).  The  presuppositions
Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politi...
China Perspectives, 2014/3 | 2014
2
embedded in these questions are not spelled out systematically in the book. Nevertheless, they
structure the analysis in a way that deserves attention, not only because it accounts for many
of the book’s contradictions, but also because it is found in other accounts of the economic
changes in China over the last 30 years.
8 The first presupposition is the idea that a “Western” model of “free markets” is superior to the
“Leninist tradition,” and that the PBC’s evolution is marked by its “quest for a market-
oriented economy” against the “constraints” “inherited” from the past (on a very fast count,
these terms appear at least 20 times in the book).These two poles are unfortunately never
analysed systematically at either the theoretical or empirical level. It is not clear what the
authors see as standing for “free market” or for “Leninism,” or what is “traditional” about an
experience that, in 1979, was at most 30 to 40 years old in China. At no point do the authors
specify which central banks belong to the “West” or why, in spite of the open differences
between the European Central Bank and the US Federal Reserve, for instance, they should be
considered to operate in the same way.
9 The authors do not attempt to justify what, according to their view, makes the “market-
oriented”  model  more  “sophisticated”  and  less  “inefficient.”  This  leads  the  authors  to
confusing and contradictory assertions. All the changes of the PBC analysed in the book are
compared to a “modern” “Western” and “sophisticated” “free market” model, which the
authors contrast with a Chinese financial system described as “immature,” “underdeveloped,”
and “flawed.” Yet they occasionally contradict this analytic framework by quoting Tang Tsou
(“Chinese Politics at the Top: Factionalism or Informal Politics? Balance-of-Power or a Game to
Win All?”, China Journal, No. 34, 1995, pp. 95-156) as saying: “Chinese history is so complex that
it provides many hard tests for theories, models, and general propositions based on Western
cases. In turn, the Chinese experience might form the basis for new general propositions
enriching the theories and models that have been built on the Western experience” (p. 14).
Empirically, the authors consider all tools that go beyond the use of interest rates to manage
money creation, such as directly telling banks where to lend, as belonging to the “legacy” of
the “Leninist tradition” and its flaws. But in a few instances, they hold that this gives the PBC a
wider array of tools than other central banks and that therefore “China is better positioned to
foster stability and growth compared with major Western economies in terms of the policy
options at its disposal” (p. 208). This leads to considerable misinterpretation. For example, the
Chiang Mai initiative is an agreement reached between several Asian governments in 2004 to
prevent foreign exchange volatility, in particular short-term speculation, by using reserves to
have a direct impact on prices. The authors interpret it as part of an internationalisation that
they feel goes hand-in-hand with a less controlled market, even though this agreement goes in
exactly the opposite direction (p. 256). Instead of reading the particular tools and policies of
the PBC as a specific result of Chinese contemporary history, the authors insist on comparing
it  to  an  idealised  neo-classic  economic  model,  without  enquiring  how  this  model  was
appropriated and intentionally transformed by the people whose actions they analyse.
10 The second major theoretical presupposition concerns assessment of the power of the PBC.
For the authors,  this  power is  not  measured by the centrality of  the bank in decisions
concerning monetary policy, but rather by how much closer the PBC’s policies draw to the
neo-classical  injunction to  fight  inflation.  This  implies,  in  turn,  an analytical  distinction
between the PBC and the CCP. According to the authors, the PBC’s application of this policy
proves it to be “independent” or at least “autonomous” from the “government” and from the
“the old Leninist state-planning system that refuses to abandon its authority in the financial
sector and politicises monetary policy” (p. 108). Again, this leads to contradictory statements.
Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politi...
China Perspectives, 2014/3 | 2014
3
The authors start by claiming that they consider the independence of the PBC in relation to
the “elite of the CCP,” and propose a distinction between “politicians” and “bureaucrats”
without  defining  either  of  these  terms:  “In  this  book,  ‘elite’  refers  exclusively  to  the
Communist Party leaders, as it is useful to differentiate politicians and bureaucrats in this
study” (p. 48). Later on, they remark, “The vagueness in interpreting the incentives and
preferences of senior bureaucrats is also due to their dual identities as government officials as
well as party cadres. Even the notion of ‘bureaucrat’ is blurred with that of ‘politician’” (p.
126). The idea of “independence from government,” which is already of dubious usefulness in
considering central banks in the U.S. or Europe, is here based on a very poor analysis of the
logic of political and economic power in China. 
11 Moreover, this analytic framework actually contradicts the description offered by the authors
themselves. Indeed, they claim that the PBC applies policies against inflation and therefore
becomes independent of the Party elite thanks to the action of Zhu Rongji, then vice-premier,
and the subsequent actions of Dai Xiaolong and Zhou Xiaochuan, both long-term allies of Zhu
and appointed as governors of the bank under his premiership. It is hard to see how this
implies that tackling inflation was not a government priority at the time, or, analytically,
where  this  “independence  from  government”  really  lies.  This  discourse  has  been  used
elsewhere since the 1990s, contending that the central bank has to be isolated from the
inflationary temptations of governments, especially before general competitive elections. This
analytic framework makes it impossible to grasp the specificities of the role of the CCP in the
distribution of power in China, leading the authors to qualify the monetary financial system as
an “awkward combination” (p. 84) of central planning and marketisation and growth.
12 The analytic framework that the authors start with, attempting to analyse the PBC within a
“reconfiguration of institutional relationships between the state and the market, between
party and government organs, and between the traditional planning and market-oriented
elements within the party-state” seems to confine them to categories that, unlike Weberian
ideal-types,  do  not  produce  clarity  but  rather  lead  to  statements  about  reality  being
“awkward” or “vague.” The authors remark that the PBC is part of the recentralisation of
power in the state’s hands after 1979, while they analyse how it becomes a centre of expertise
drawing in part on a global epistemic community. Yet, instead of analysing the creation of a
technocratic centre of power that is intrinsically part of the CCP and of the Chinese state at a
time when these institutions have been transformed by entering a global arena that they have
helped to modify, the authors base their analysis on categories that appeal to the neo-classic
enthusiasm about “bold and radical reforms” (p. 295) for a project that even the IMF is
criticising today. 
13 The book offers a rich synthesis of the changes in policy and regulation in central banking in
China over the last 30 years. Nevertheless, it would have probably benefited from a more
empirically-oriented analytical framework that takes into account the specificities of Chinese
contemporary history.
Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politi...
China Perspectives, 2014/3 | 2014
4
AUTHOR
HORACIO ORTIZ
Horacio Ortiz is a post-doctoral researcher at the Centre de Sociologie de l’Innovation, Mines
Paris Tech (horacio.ortiz@free.fr).
Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politi...
China Perspectives, 2014/3 | 2014
5


Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politics of Institutional Change,

http://journals.openedition.org/chinaperspectives/pdf/6544

Stephen Bell and Hui Feng, The Rise of the People’s Bank of China: The Politics of Institutional Change,

Abstract

Similar works

Full text

Available Versions

OpenEdition