BEIJING (Reuters, Bloomberg) - China's Parliament named new finance and state security ministers on Monday (Nov 7), part of a reshuffle ahead of a key Communist Party meeting next year, the official Xinhua News Agency reported.
Mr Xiao Jie replaces Mr Lou Jiwei as finance minister, while Mr Chen Wenqing was named the new state security minister, replacing Mr Geng Huichang.
Also appointed was Mr Huang Shuxian as the new head of civil affairs, in place of Mr Li Liguo.
The decision, along with other personnel changes, was announced after a session of the National People's Congress, the nation’s top legislature, in Beijing. No reasons were given for the replacements.
Mr Lou, who had served as finance minister since March 2013 and is one of China’s most outspoken reformists at a time of global concern over the country’s economic slowdown, has to retire as he is 65, analysts and policy advisers said.
“It’s normal for cadres at ministerial level to step down at his age,” said Qiao Mu, a Beijing-based academic, told Financial Times. “The party is making personnel adjustments ahead of [next year’s] congress.”
But the sudden departure of such a prominent figure still surprised many analysts, the newspaper said.
Eswar Prasad, a professor at New York’s Cornell University and former head of the International Monetary Fund’s China division, noted that Mr Lou had played a key role in President Xi Jinping’s larger effort to rebalance China’s economy away from its traditional reliance on investment-led growth.
Still, the reshuffle is expected to have little impact on fiscal policy, which is expected to be supportive in 2017 as the government leans more on increased spending and tax cuts to support growth, the analysts said.
Mr Xiao, 59, worked for three years as vice secretary-general of the State Council, an important aide to Premier Li Keqiang, and was previously the country’s tax chief.
Last month, President Xi said China will maintain a pro-active fiscal policy, adhere to prudent monetary policy and keep reasonably ample liquidity while focusing on controlling asset bubbles and controlling financial risks.
China’s current fiscal deficit target is 3 per cent of gross domestic product (GDP), up from an actual 2.4 per cent in 2015.
“The fiscal deficit is likely to expand further this year,”said a government economist who declined to be identified because he was not authorised to speak to the media. “Monetary policy could still be accommodative but the effectiveness of monetary policy is falling.”
Some central bank officials have said China has room to raise its fiscal deficit ratio to between 4 and 5 per cent to more effectively boost the economy.
Policy insiders expect Mr Xiao to continue fiscal reforms, but President Xi is seen as calling the shots in setting the key economic and reform agenda. Top leaders and policymakers are expected to map out the agenda for 2017 at the annual Central Economic Work Conference, expected in December.
Risks posted by China’s growing debt and red-hot property market have touched off an internal debate over whether China should tolerate growth as low as 6 per cent in 2017 to allow more room for painful reforms. Mr Lou has been pushing fiscal reforms under which tight controls have been imposed on new local government debt issuance to help ward off financial risks following a borrowing binge since the global financial crisis.
Local governments have been allowed to swap high-cost maturing debt for lower-cost debt, under a programme that was kicked off in 2015.
China’s overall debt has jumped to more than 250 per cent of GDP from 150 per cent at the end of 2006, the kind of surge that in other countries has resulted in a financial bust or sharp economic slowdown, analysts say.
Under the banner of prudent monetary policy, banks doled out a record amount of credit this year to support growth, but credit has been flowing into the property sector as the real economy weakens, and fuelled debt risks.
The IMF has warned that the high corporate debt ratio of 145 percent of GDP could lead to slower economic growth if not addressed.
Last week, Mr Lou said in written comments at a forum that China is actively pushing reforms on property taxes as it overhauls its fiscal system.
But policy insiders said the tax is unlikely to be rolled out any time soon due to debates on its economic impact.
The communist party will hold its 19th National Congress of the Communist Party in Beijing next year.