The New Head of China’s Money Machine Faces a Delicate Balancing Act

China’s new central bank governor, Yi Gang, inherits a powerful money machine and a vast policy portfolio. Yet the People’s Bank of China is only part of an apparatus that ultimately answers to just one man: President Xi Jinping. Interest rate and financial regulatory calls need approval from Chinese officialdom, a reality that makes the PBOC far different from the more politically independent U.S. Federal Reserve and European Central Bank.

With an implicit mandate to do whatever furthers China’s economic agenda at home and abroad, the PBOC is an institution with awesome firepower. Its $5.7 trillion in financial assets give it the biggest balance sheet among major global central banks—a product of years of trade surpluses and capital inflows. “It certainly plays a large external role for China, and more explicitly than any other major central bank,” says Alex Wolf, senior emerging-markets economist at Aberdeen Standard Investments in Hong Kong, who previously worked at the U.S. State Department. He says the PBOC has clear responsibility for areas stretching from domestic economic reform and interest rates to bigger geostrategic ambitions such as increasing usage of China’s currency, the yuan, around the world.