Rumors have circulated in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country. The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou. Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou’s defection have spread around China intensively, and Zhou’s name has been blocked from Internet search engines in China.
STRATFOR has received no confirmation of the rumor, and reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment. However, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China (CPC) is preparing for a leadership transition in 2012.
Two knowledgeable government officials, speaking on condition of anonymity, said they had no evidence of Zhou’s defection and that he was not in U.S. custody.
“There’s no indication at this point that he’s defected,” said one. “It doesn’t pay to give too much attention to rumors.”
A nonpartisan congressional China expert, speaking on condition of anonymity, said that the losses cited for the PBC were ridiculous.
“I’m not sure how exactly anyone could have ‘lost’ money on investing in U.S. Treasuries since they have been doing a lot better than U.S. stocks,” he said by e-mail.
See also “Runaway Central Banker? Rumors China Suffers Massive Treasury Losses” from Barron’s.