Parting shot, etc.


In what could be one of his last major interviews in the top job, Zhou Xiaochuan, the veteran People’s Bank of China (PBOC) governor who is expected to retire soon, told Chinese magazine Caijing that China should seize the moment to let the market decide the yuan’s value and scrap capital account controls. Zhou’s call for reform came amid speculation that China’s leadership is veering away from liberalisation towards a more nationalistic and centralised approach to managing the world’s second-biggest economy. The interview, published days before the Communist Party meets to decide on a new leadership line-up, underscored Zhou’s long-standing liberal monetary views. Analysts said it was also reminder to the country’s future leaders and financial technocrats of what needs to be done to make China an open economy.

Zhao Yang, chief China economist at Nomura International in Hong Kong, said freeing up the capital account was a long-term task and leaders had other priorities now. “Given the capital outflow pressure, the government priority will be to lure capital inflows,” Zhao said. As a pro-market champion, Zhou can count the International Monetary Fund’s decision to give the yuan nominal international reserve currency status as one of his achievements in his 15 years as PBOC governor. In the interview published on Monday, Zhou said risk aversion and turf wars had held back further market liberalisation in China. He said free trade, a free exchange rate and free capital flows were an indivisible “trinity” but China’s bureaucracy had turned them into separate entities.

Central planning versus markets, one of the greatest debates in our time re China. What? You’re not interested? Then listen to a philosopher-king.

Lady Baden-Powell spoke at the 1964 Boy Scout Jamboree at Valley Forge, which we attended. She was very funny, alas, not intentionality. We heard an odd sound today, like someone flipping over in her grave. Two generations of destructive foolishness is more than Western Civ can survive without catastrophic intervention.

We recommend Dylan and the Baez version to ease the pain.

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