Hu Xiaolian

China's cabinet has put the current head of China's foreign exchange agency, Hu Xiaolian, in charge of a soon-to-be-formed special monetary policy office to promote internationalization of China's currency, the yuan.

Caijing learned that Hu, 51, has been named by the State Council to head the Monetary Policy Department II, which is soon to open at the People's Bank of China, the central bank, as part of a government push to globalize the yuan for trade.

The State Council also approved the appointment of Yi Gang, deputy president of China's central bank, to replace Hu as director of the State Administration of Foreign Exchange (SAFE).

The personnel swap came at a time of growing speculation that China may tighten what's now a loose monetary policy. The appointments also could fuel speculation that the central bank may take new steps aimed at draining excess liquidity and preventing inflation.

Yi's appointment was expected to be made public soon, according to senior management sources at SAFE and the central bank. Bank officials nominated Yi in May and later submitted the official proposal to the State Council.

Hu is the third-highest ranking vice president at the central bank. She is considered an expert in China's fight against so-called "hot money."

China has been advocating a broader role for the yuan on the world's financial stage.

China recently signed currency swap agreements with several key trading partners, including Brazil and Argentina. In addition, China has launched a pilot program for using the yuan in bilateral trade settlements.

(Caijing.com.cn July 13, 2009)