Economy

Zhu Hexin, one of China’s most senior commercial bankers, is among the frontrunners to take over as the governor of the country’s central bank as Beijing prepares to overhaul the leadership of its most important financial regulatory institutions next month.If his nomination is confirmed, Zhu, the chair of state-owned conglomerate Citic Group, would succeed Yi Gang as governor of the People’s Bank of China, two people familiar with the nomination said.The appointment of the new central bank leadership is expected to be reviewed at the annual meeting of China’s rubber-stamp parliament, the National People’s Congress, in early March. Apart from appointing new leaders at the financial regulators, the party is also expected to undertake a wider government reshuffle, including appointing new ministers. The changes will come at a crucial moment for China’s economy, which is bouncing back from the austerity of President Xi Jinping’s zero-Covid policies last year. It also follows a Communist party conference in October, in which Xi was able to appoint his own loyalists to the Politburo standing committee, the party’s most senior decision-making body. Apart from a pandemic blip in 2020, when gross domestic product expanded just 2.2 per cent, China’s growth rate last year of 3 per cent was the slowest since 1976. The new appointments will be closely watched by the market after Xi moved in recent years to exercise closer control over the economy, cracking down on private entrepreneurs as part of his policy of “common prosperity”. Economic challenges facing China’s central bank include fostering a recovery in the property market, with many of the country’s main developers defaulting on their debts. Other problems include controlling systemic financial risks in the wake of corporate and financial distress caused by Covid. Among other potential appointments expected to be announced at next month’s legislative meeting, Wu Qing, the Shanghai vice-mayor who supervises the financial and business affairs of China’s financial hub, is the leading candidate to head the country’s top securities watchdog, the China Securities Regulatory Commission.

Yi Huiman, the chair of the CSRC, is among the favourites to take over at the China Banking and Insurance Regulatory Commission, the banking regulator, according to a separate source familiar with the nomination. Zhu’s candidacy for the PBoC, which was first reported by the Wall Street Journal, follows a long career at state-owned lenders, starting with Bank of Communications, where he served for two decades until 2015. Zhu took other roles in rival Bank of China and in the local government in western Sichuan province before he was appointed as vice-governor at the PBoC in 2018. Two years later, in 2020, Zhu was appointed chair of Citic Group, where he beefed up the conglomerate’s role in financial bailouts of struggling institutions including Huarong Asset Management and regional banks. More

Joe Biden has nominated former Mastercard chief executive Ajay Banga as World Bank president, picking a Wall Street veteran raised in India to oversee the institution’s biggest mission change in a generation.Banga’s nomination, a week after sitting president David Malpass abruptly resigned, comes as the US and other shareholder nations seek to expand the bank’s development remit to include the fight against global warming.The US president said Banga had a grasp of the challenges facing developing countries and “critical experience” in mobilising private money to “tackle the most urgent challenges of our time, including climate change”. While the US, the bank’s largest shareholder, has traditionally chosen the World Bank president, it requires backing by other member countries. China, Japan, Germany, France and the UK are also major shareholders. The nomination of the 63-year-old, who once described himself as a “totally made in India guy”, may help win the support of developing nations, some of which are uneasy about a shift in the bank’s focus from poverty to climate change.But Banga’s emergence as the favourite for the World Bank post comes only hours after the institution’s board said on Wednesday that it “would strongly encourage” female candidates.G20 finance ministers are expected to discuss the bank’s future at a meeting in Bengaluru on Friday and nominations will close by March 29 ahead of a May start date for the new president.Banga, currently vice-chair of General Atlantic, a US private equity group, was the chief executive of payments company Mastercard until the end of 2020. He also serves as chair of the investment holding company Exor, which owns a controlling stake in Juventus football club, and as an independent director at Temasek, Singapore’s state-owned investment fund. His nomination comes after the bank’s biggest shareholders increasingly agitated for it to incorporate climate into development work and criticised Malpass, who was appointed by the Trump administration, for failing to embrace the agenda.The pressure on the outgoing president increased after he refused to say whether he believed in human-caused climate change at a conference in September, despite repeated questioning. He later said he had been misunderstood.

US Treasury secretary Janet Yellen this month urged the bank’s leadership to “quickly” put in place reforms to free up more money to address climate change. A senior US official said Washington was “proud” to put forward a candidate who was born, raised and “spent an early part of his career in an emerging market in India”.“That is absolutely part of who he is as a professional, as well, and what he will bring to the World Bank,” said the official. Banga is now a naturalised US citizen.Banga oversaw close to a decade of strong revenue growth at Mastercard and was seen as an advocate of global financial inclusion. He was also among dozens of chief executives who called on governments in an open letter to do more to cut emissions ahead of the COP26 climate summit. More

By Ezgi Erkoyun and Daren ButlerISTANBUL (Reuters) -Turkey’s central bank cut its main interest rate to 8.5% from 9% on Thursday, moving to cushion the economic impact of a devastating earthquake that killed more than 43,000 people in country’s south on Feb 6.The cut was expected following the disaster, though some economists had predicted a considerably bigger reduction.”It has become even more important to keep financial conditions supportive to preserve the growth momentum in industrial production and the positive trend in employment after the earthquake,” the central bank said in a statement.It also said after its monthly monetary policy committee meeting that it will closely monitor earthquake-driven supply and demand imbalances and their impact on inflation, while mainly stressing the importance of supporting growth and jobs.The decision had little impact on the lira, which traded at 18.8755, barely changed from its early levels. The currency has touched record lows against the dollar in recent weeks, but its moves have been far smaller since the summer due to state control of the currency market.Even before the quakes, analysts said there could be more easing ahead of presidential and parliamentary elections due by June 18 and expected on May 14, and in which President Tayyip Erdogan is expected to face the biggest political challenge of his two-decade rule.The central bank kept rates steady at 9% in December and January but has now cut them by 1,050 basis points since late 2021.A 500-bps run of easing last year and subsequent slump in the lira contributed to inflation soaring above 85%. It dropped to a still-high 58% in January.Erdogan has urged monetary stimulus over the last several years, aiming to achieve price stability by slashing borrowing costs, boosting exports and flipping chronic current account deficits to surpluses.A previous flurry of rate cuts sparked a late-2021 currency crash. The lira lost 44% versus the dollar that year and a further 30% in 2022, stoking inflation.In a Reuters poll of 17 economists, the median forecast was for a 50-bps cut to minimise the economic hit from the earthquake. But while nine had expected, in some cases of up to 200 basis points, eight institutions had forecast no change.Istanbul-based Economist Enver Erkan predicted more cuts could follow.”The base effect in inflation creates a confidence interval from the CBRT (central bank’s) perspective, so before the election, there may be a rate cut again.” Business groups and economists have said the earthquake could cost Ankara up to $100 billion to rebuild housing and infrastructure, while shaving one to two percentage points off economic growth this year. More

WASHINGTON (Reuters) – The World Bank on Wednesday said it expects to select a new president by early May to replace David Malpass, who announced his resignation last week, leaving open a job that oversees billions of dollars of funding and has a direct impact on poverty, climate change preparation, emergency aid and other issues in developing countries around the globe. The bank has historically been headed by someone from the United States, its largest shareholder, while a European heads the International Monetary Fund (IMF), but developing countries and emerging markets are pushing to widen those choices.The bank’s board said nominations would be accepted from Feb. 23-March 29. It said countries were encouraged to nominate women candidates. The bank has never had a permanent woman president in its 77-year history, although current IMF chief Kristalina Georgieva served as acting president for about two months in early 2019.The board laid out criteria for candidates, including work in development, experience managing large organizations with international exposure, a firm commitment to multilateral cooperation, and the ability to articulate a clear vision for the institution as it embarks on a series of major reforms.According to the bank’s 2021 annual report, Malpass earned $525,000 in net salary that year, and the bank made more than $340,000 in annual contributions to a pension plan and other benefits. After early April, Malpass’ contract entitles him to a pension equivalent to 70% of his salary. Here are names being floated by U.S. officials, climate change experts, and global development peers as possible candidates for the job:RAJIV SHAH Shah was the U.S. Agency for International Development (USAID) administrator under former President Barack Obama and is current president of the Rockefeller Foundation, a philanthropic group that says it aims to “promote the well-being of humanity throughout the world.” The foundation recently partnered with the U.S. State Department on a carbon offset program at COP27, the international climate conference. AJAY BANGAIndian-American Banga, vice chair of General Atlantic, a U.S. growth equity firm, retired in December 2021 after 12 years at the helm of Mastercard (NYSE:MA), where he set a target of bringing 1 billion people and 50 million micro- and small businesses into the digital economy by 2025. He also serves as co-chair of the Partnership for Central America, where he worked closely with U.S. Vice President Kamala Harris to mobilize public, private and non-profit resources for Northern Central America. NGOZI OKONJO-IWEALAThe current head of the World Trade Organization and former World Bank official has been discussed as a potential successor to Malpass. The dual U.S. and Nigerian citizen served twice as Nigeria’s finance minister and had been a managing director at the World Bank, overseeing an $81 billion operational portfolio in Africa, South Asia, Europe and Central Asia.SAMANTHA POWER Power, who currently leads the USAID, is a long-time human rights advocate, diplomat and former journalist. She served as U.S. ambassador to the United Nations under President Barack Obama and won a Pulitzer Prize for her 2002 book, “A Problem from Hell,” a study of the U.S. failure to prevent a number of genocides over the past century. INDRA NOOYIIndian American Nooyi, who served as CEO of PepsiCo (NASDAQ:PEP) from 2006 to 2018, has been an advocate for the role of business in tackling climate change. Under her tenure at PepsiCo, she created Performance with Purpose, a strategic initiative that tied revenue goals to societal good. Some have called that program a precursor to current Environmental, Social and Governance (ESG) metrics used by many companies. She currently serves as a member of the Earthshot Prize Council, a 50-million-pound award for technologies and solutions that tackle major environmental problems. GAYLE SMITHA former administrator of USAID in the Obama administration, Smith currently serves as CEO of the One Campaign, an NGO focused on ending extreme poverty and preventable disease. She had served under Democratic President Bill Clinton as the special assistant to the president and senior director for African Affairs at the National Security Council. More

BENGALURU/WASHINGTON (Reuters) -The United States intends to “quickly” nominate a candidate for the World Bank presidency who is committed to the lender’s poverty reduction mission as well as lending reforms to fight climate change and other global challenges, U.S. Treasury Secretary Janet Yellen said on Thursday.At a news conference ahead of a G20 finance leaders meeting on the outskirts of Bengaluru, Yellen declined to name the U.S. nominee or say whether the candidate would be a woman.The World Bank’s executive board plans to open nominations for the development lender’s top job later on Thursday, and said it “would strongly encourage women candidates to be nominated.”The board expects to choose a new candidate by early May, replacing current president David Malpass, who said he will step down by early June, well before his term ends in April 2024.One of the surprise top contenders for the post is Indian-American Ajay Banga, who retired in December 2021 after 12 years at the helm of Mastercard (NYSE:MA), and co-chairs the Partnership for Central America, where he worked closely with U.S. Vice President Kamala Harris to mobilize public, private and non-profit resources for Northern Central America.Two sources familiar with the process said Banga was seen as an ideal leader for the World Bank, given his ability to bring together private and public organizations and his focus on inclusive growth.Other names include Samantha Power, who leads the U.S. Agency for International Development and served as U.S. ambassador to the United Nations under President Barack Obama, and Rajiv Shah, former USAID administrator under Obama who now heads the Rockefeller Foundation, a philanthropic group.The U.S. Treasury manages the dominant U.S. shareholding in the World Bank, giving Yellen strong influence over who leads the institution. Since the World Bank’s founding at the end of World War Two, the United States has traditionally chosen the bank’s leader, while Europe has chosen the head of the International Monetary Fund. Yellen said the U.S. candidate will have the qualifications needed to lead the world’s largest development lender and be committed to lending reforms to fight climate change, pandemics and other global challenges while preserving the bank’s longstanding work to reduce poverty.”We intend to quickly put forward a well-qualified candidate. And I don’t have any updates for you on who that might be, stay tuned,” Yellen said. More

The news was first reported on Thursday by the Wall Street Journal, which also said He Lifeng, head of China’s state planning agency and longtime confidant of President Xi Jinping, is likely to become the central bank’s Communist Party chief.He’s party role would be in addition to his expected appointment as vice premier in charge of the economy, the Journal reported, a position he had been widely expected to take over from Vice Premier Liu He, who is set to retire.The People’s Bank of China and the State Council Information Office did not immediately respond to requests for comment.If confirmed, the 54-year-old Zhu would replace Yi Gang, who has been expected to retire during next month’s leadership reshuffle after he was dropped from an elite body of the ruling Communist Party at its once-in-five years congress in October.Zhu is chairman of financial conglomerate Citic Group Corp and has previously held senior posts at state lenders Bank of Communications and Bank of China. He has also been a vice president in the central bank, and vice governor of Sichuan province in southwestern China.In addition to those changes, the Communist Party was also planning to resurrect its Central Financial Work Commission, a policy-setting body that existed between 1998 and 2003, the Journal said, citing sources. More

European Union countries fear the U.S. legislation’s $369 billion of subsidies for electric vehicles and other clean technologies could put companies based in Europe at a disadvantage.The subsidies, largely for manufacturers based in North America, have local content requirements that EU leaders fear may lure companies away from Europe. The legislation excludes electric vehicles assembled outside of North America from tax credits in the United States. “I am planning to go to Washington D.C. in early March to discuss the issues related to the Inflation Reduction Act,” Dombrovskis said on Thursday while in the Bulgarian capital Sofia.”The U.S. has indicated openness to find ways how to treat us as a free trade agreement equivalent partner,” he said.Through a taskforce set up between the two sides “we will be able to solve some of our problems with the IRA but not all of our problems”, he said.Dombrovskis met U.S. Trade Representative Katherine Tai last week on the margins of the Munich Security Conference.The EU wants the same treatment as U.S. trade partners Canada and Mexico, whose production is largely included in the subsidy schemes but any revision of the act by the U.S. Congress is out of the question.Some EU countries have warned the bloc against waging a subsidy race with the United States.European nations are not the only ones who have raised concerns about the U.S. legislation. South Korea has also sought talks with the United States over it. More

LONDON (Reuters) – An informal group of international bondholders has proposed to Ethiopia’s government to extend the maturity of the country’s $1 billion eurobond issue coming due in 2024, three sources with direct knowledge of the matter told Reuters. The proposal involves the debt maturity being extended to 2029 or 2030 as well as an amortising structure to avoid a big lump-sum payment at the end, with the last five years seeing repayments of $200 million a year, said one of the sources, who like the others asked not to be named because talks are private.”There have been a number of approaches, but so far without getting any response” from the government, the source added.The Ethiopian government, which to date has not defaulted on any payments on the dollar-denominated bond, did not immediately respond to a Reuters request for comment on the proposal.Africa’s second-most populous country in early 2021 requested a broader debt rework under the Group of 20’s Common Framework, an initiative for restructuring government debt aimed at low-income countries. But progress has been complicated by a two-year civil war that broke out in November 2020, killing thousands of people and displacing millions.The International Monetary Fund (IMF) said in a statement following a visit last June that a debt treatment under the G20 Common Framework was “essential to reduce debt vulnerabilities” for Ethiopia. The IMF estimated government debt-to-GDP at 46.4% last year and reserves covering only around three weeks of imports – well below the three months seen as a safe minimum.The international bond only makes up a small part of the country’s total external government debt, which stood at $27.4 billion in the third quarter of last year, according to World Bank data. The sources said the proposal to extend the eurobond maturity foresees a coupon of 6.625% – the same as the current one on what was originally a 10-year bond that is the country’s only outstanding international note. The next coupon payment on the 2024 bond is due in June, with the issue trading at around 68 cents in the dollar and yielding more than 30%, according to Refinitiv data. It has a long-term rating of CCC- from Fitch Ratings, which means it is a substantial credit risk with a real possibility of default. International bondholders have not formed a private creditors committee for the extension proposal because Ethiopia has continued to service the bond normally, two of the sources added. They declined to provide details on the informal group’s membership.Recent filings show that Franklin Templeton Fixed Income Group and Allianz (ETR:ALVG) Global Investors U.S. LLC are some of the holders of the bond, according to EMAXX data. Ethiopia’s civil war had delayed progress with creditors on a broader debt workout. A bilateral creditors committee co-chaired by France and the largest bilateral creditor China committed to granting debt relief last August, but further progress requires a deal with the IMF. In November, Ethiopia’s government and the Tigray People’s Liberation Front agreed to stop fighting and signed a truce laying out the roadmap for implementation of a peace deal, paving the way for a much-needed IMF funding programme. The nation of 115 million has been one of the world’s fastest-growing economies in the past 15 years, boosted by heavy infrastructure investment, but the COVID-19 pandemic and the conflict that has now subsided have slowed expansion in recent years. The IMF estimates that Ethiopia’s economy will grow by 5.3% this year. More