Yi Gang looks like a typical banker in a navy blue suit, white shirt and subtle tie. Steel-rimmed glasses reinforce the image. But these are not typical times for the 60-year-old governor of the People’s Bank of China.

Since taking over from mentor Zhou Xiaochuan in March, he has had to deal with the fallout from rising trade tensions between Beijing and Washington, a cooling economy and melting mainland equity markets.

Side-effects from the credit crunch and a weakening renminbi have further complicated the picture.

Not bad for his first eight months in the job.

Last week, Yi even had to step in to ease concerns after the sell-off in Shanghai and Shenzhen, stressing that market mayhem had been fueled by sentiment rather than by underlying fundamentals.

“Market volatility is mainly affected by investor expectations and sentiment,” he said in a statement released on the PBOC’s or central bank’s website.

‘Financial risk’

Backing that up, Yi reiterated that “financial risk prevention and control have progressed” while “the economy continues to maintain steady growth.”

Still, on Thursday Asian markets wobbled again with Shenzhen closing down while Shanghai erased earlier losses to finish fractionally up after the overnight rout on Wall Street.

In the past nine months, nearly US$3 trillion have been wiped off the Shanghai Composite Index, which has fallen to levels not seen since the 2015 crash.

“Overall, the current stock market valuation has been at a historically low level, which is in contrast to China’s stable economic fundamentals,” Yi said.

Yet the biggest losers have been the vast army of retail investors, or China’s middle class, which also drives the economy. Household debt is increasing while official data showed that consumer loans have jumped by 21% during the past year.

At the same time, national retail sales growth has slowed to a record low of 9.4%, which points to consumer loans being used to fund mortgage payments, monthly bills or even speculative investments in the merry-go-round markets.

“The potential damage to the Chinese economy by the trade war is weighing on millions of investors,” Ivan Li, an asset manager with hedge fund Loyal Wealth Management, told the Chinese media. “But investors want to see concrete evidence showing the economy will remain stable and companies will continue to post profits, not empty talk.”

As for the broader economy, analysts tend to agree that if business activity continues to weaken, Beijing will have to launch a series of stimulus programs. In effect, this would be putting growth ahead of the war on debt, the fiscal crusade rolled out by President Xi Jinping.

Private sector

Funding is so tight that the pain is being felt across vast parts of the private sector with state-owned enterprises, or SOEs, hogging the investment trough.

Already Yi and the PBOC have announced plans to establish a new bond financing scheme for private businesses.

“But that does not mean there’s been a change in monetary policy stance,” Xu Zhong, the director general of the research bureau of the PBOC, wrote on Caixin’s media website. “The aim of these measures is to compensate for the financing shortcomings affecting the private-sector economy, and to provide short-term, market-based support for firms that are facing temporary difficulties.”

It is open to debate if that will be enough to prop up the industry, which has been hit hard by the trade war and the “squeeze” on credit.

“The restriction on smaller lenders because of [a] funding squeeze is why the PBOC has stepped in,” Andre de Silva, the global head of emerging-markets rates research at HSBC, told Bloomberg: Markets Asia. “But the question is what measures are coming? It should be a case of all hands on deck for growth.”

For Yi, the next eight months could be just as grueling as the first.