A major reshuffling of China's top banking officials is
reportedly in the works.  Key allies in Prime Minister Zhu
Rongji's economic reform effort will reportedly lose out,
apparently at the hand of President Jiang Zemin.  Zhu has failed
to pull China out of its economic slump, and his remaining
strategies threaten only to increase unemployment and social
unrest.  Jiang has apparently had enough, and is moving to take
control of Zhu's tools of reform.  The question is, if he no
longer has the means to implement his economic policies, what
purpose does Zhu serve?

Analysis:

The Hong Kong Economic Times reported August 2 that a major
reshuffling of China's senior banking officials is in the works,
and will be discussed at the upcoming Beidaihe retreat of China's
top leaders.  The key move involves People's Bank of China (PBC)
Governor Dai Xianglong, who will reportedly be appointed Shanghai
Communist Party chief. Dai's former post will be filled by Zhou
Xiaochuan, who currently heads the China Construction Bank.  Wu
Xiaoling, currently head of the PBC's Shanghai operations, will
reportedly assume the role of PBC Deputy Governor.  That post was
recently vacated by Liu Mingkang, who replaced the head of the
China Everbright state-run investment company, Zhu Xiaohhua, who
in turn was reportedly under investigation for "economic
abnormalities."  Shanghai's former party chief, Huang Ju, will
reportedly be called to Beijing to fill an as yet unreported
post.  When questioned by Agence France-Presse about the reported
shuffle, a PBC spokesman said simply, "We cannot confirm this
kind of information."

The shuffling of China's top banking officials would be a matter
of interest at any time, but it is of particular note as China
continues to wallow in the economic doldrums following the broad
Asian economic collapse.  Foreign investment in China is slowing,
and attempts to boost the economy through consumer spending and
domestic investment have faltered. The finance ministry has even
floated the idea of implementing a tax on interest from bank
savings, in hopes of boosting spending, though it would likely
just increase the hoarding of savings outside the banking system.
Zhu Rongji is running out of ideas, as his plans for further
reform call for more of the same -- more streamlining, more
unemployment, and therefore more social unrest. Meanwhile,
analysts are again talking about a possible devaluation of the
yuan.

In this context, the banking shuffle suggests Zhu's days may be
numbered.  PBC Governor Dai Xianglong was a key ally of Zhu,
critical to carrying out his fiscal reforms.  Talk of shifting
him to Shanghai's Party offices, an unmistakable demotion for a
top economic official, has been in the wind since April, when the
South China Morning Post reported that Zhu was balking at the
shift. Huang Ju, in turn, is a crony of President Jiang Zemin,
and Zhu has reportedly also firmly opposed his transfer to
Beijing.  According to the South China Morning Post, Huang and
Guangdong party secretary Li Changchun are in line for unknown
but certainly high ranking posts in Beijing.

Zhou Xiaochuan, slated to replace Dai as head of the PBC, is
reportedly less a reformer than his predecessor.  Moreover, his
loyalties will most certainly rest with the one who puts him in
his post -- by all indications, President Jiang.  Zhou's China
Construction Bank has been central to China's bootstrapping
national infrastructure projects, a model familiar to the old
school economists in Beijing. Wu Xiaoling's Shanghai branch of
the PBC manages China's Rural Credit Cooperatives, distributing
credit to regions outside the impact of foreign investment
dollars.

Jiang, concerned with Zhu's flagging reforms, appears to be
consolidating his grip on the tools of that reform.  As this
further undermines Zhu's ability to carry out his economic
strategies, one can only assume that Zhu's days are numbered as
well.  The finance official reshuffling will reportedly be
discussed at the upcoming Beidaihe retreat of China's top
leaders.  There, Zhu ally Dai may be sent to refresh his ideology
in Shanghai.  The question is, will Zhu be sent to join him?