Amid the turmoil in emerging markets, Zhu Changhong, China’s foreign exchange reserve trader and chief investment officer, resigned in a low-key manner. On January 29, the State Administration of Foreign Exchange confirmed it.
Zhu Changhong's departure marks the failure of China's foreign exchange reserve investment diversification strategy over the past four years. This process is complicated by numerous domestic and foreign political interests. The Central Bank of China's reckless intrusion into Japanese government bonds triggered complex conflicts and plunged the country into a quagmire, which became the last straw.
China's economy is undergoing its third round of collision tests since 2007, caused by Japan's recession and conflict with China. The problem of foreign exchange reserves can only be truly solved after customs clearance.
The coming and going of Zhu Changhong
On January 29, the State Administration of Foreign Exchange issued a letter confirming:
"According to the planned arrangement, Director Zhu Changhong's work in the Central Foreign Exchange Business Center of the State Administration of Foreign Exchange will end at the end of January 2014."
There is no explanation as to why Zhu resigned or his whereabouts. But this does not prevent us from looking for clues from a large number of clues and confirming some important propositions. MFI has been tracking Yi Gang's speeches at the State Administration of Foreign Exchange, and some well-known mysteries should now be explained.
In February 2010, Zhu Changhong resigned from the Pacific Investment Management Company (PIMCO), the world's largest bond fund, led by "Bond King" Bill Gross, and became the chief investment officer of Huaan Investment. Huaan Investment, registered in Hong Kong, is responsible for maintaining and increasing the value of China's foreign reserve assets.
Zhu Changhong’s joining of Huaan Investment was inseparable from the invitation of Yi Gangli, then director of the State Administration of Foreign Exchange. The State Administration of Foreign Exchange originally had no talents qualified for global strategic investments. It is said that most of the talents brought back from Wall Street are novices with one or two years of experience, so generally there are old people and young people. CIC, which was established in 2007, attracted a few elites. Since then, the competition for talents between CIC and the State Administration of Foreign Exchange has not stopped. The sharp depreciation of the U.S. dollar in 2008 led to a huge floating loss in foreign exchange reserves. As a result, in June 2009, the "indigenous" Hu Xiaolian was removed from the position of director of the State Administration of Foreign Exchange and replaced by Yi Gang, who has a "turtle" background. Yi Gang's first political achievement after taking office was to recruit Zhu Changhong.
Zhu Changhong worked for PIMCO for ten years and was promoted to managing director in only six years. He managed the investment portfolios of government bonds, agency bonds and derivatives departments at PIMCO. Yi Gang's poaching of Zhu Changhong was not purely natural. PIMCO has had long-term cooperation with the China State Administration of Foreign Exchange and has a good relationship. It also has an office in Beijing. Moreover, the State Administration of Foreign Exchange has previously invested in products managed by Zhu Changhong.
