SHANGHAI/BEIJING (Reuters) – A former senior executive of U.S. private equity fund J.C. Flowers & Co has agreed to head one of the most important divisions of China’s central bank, the Financial Stability Bureau, two sources with direct knowledge of the appointment said on Monday.
Xuan Changneng, former managing director of J.C. Flowers in charge of its China operations, will replace Zhang Xin, current head of the Financial Stability Bureau of the People’s Bank of China, the country’s central bank, said the sources.
Xuan, who also worked for China Construction Bank (601939.SS) (0939.HK) as its board secretary before joining J.C. Flowers, is already working in the research department of China’s central bank, the sources said.
An official announcement on his appointment is expected to be made soon, they added.
Xuan, who studied and worked in the United States for about a decade in the 1990s, is a long-time ally of current China central bank chief Zhou Xiaochuan, who invited Xuan to return to China to join the China Securities Regulatory Commission in 2000 when Zhou was chairman of the country’s top securities watchdog.
“Xuan is a very strong supporter to Zhou and they are really good friends,” said one of the two sources, adding Xuan is also well known for his communications skills and academic background in the financial world of both China and the U.S.
Zhang, who has headed the Financial Stability Bureau since 2005, will become the new head of the Shanghai branch of China’s central bank, said the sources, who declined to be identified due to the sensitive nature of the matter.
Hu Pingxi, former head of the Shanghai branch of China’s central bank, has been appointed as the Chinese Communist Party chief of state-controlled Shanghai Rural Commercial Bank, in which Australia and New Zealand Banking Group Ltd (ANZ.AX) holds a 20 percent stake, said the sources.
A central bank official declined to directly comment on Xuan’s appointment, but added: “All job appointments or changes will serve the benefit of the central bank as long as needed.”
J.C. Flowers could not be immediately reached for comment.
A POWERFUL DEPARTMENT
The Financial Stability Bureau is a powerful central bank department responsible for the stable operation of major state-owned financial institutions. It also influences major financial policy including monetary and foreign exchange policy.
China’s cabinet led by Premier Wen Jiabao decided to set up the Financial Stability Bureau within the central bank in late 2003 when Beijing started to inject part of its huge foreign exchange reserves into then troubled major state lenders.
Zhang replaced Xie Ping, the first head of the Financial Stability Bureau, who is now the general manager of Central Huijin, a unit of China Investment Corp (CIC), the country’s $200 billion sovereign wealth fund.
Central Huijin is a major shareholder of many big Chinese banks, including China Construction Bank, Bank of China Ltd (601988.SS) (3988.HK) and Industrial and Commercial Bank of China Ltd (601398.SS) (1398.HK), as its main role is to work as a government representative to bail out these firms, once in financial trouble.
Early last year, CIC agreed to chip in about 80 percent of a new $4 billion private equity fund launched by J.C. Flowers, with a focus on investments in troubled U.S. financial assets and Xuan led the deal for J.C. Flowers at that time, said the sources.
By George Chen and Xie Heng
(Editing by Ian Geoghegan)