(Bloomberg) – China has replaced veteran reformer Lou Jiwei with a new finance minister who’ll be tasked with juggling fiscal stimulus and efforts to rein in excess leverage in the world’s second-largest economy.
Xiao Jie, previously a senior aide to Premier Li Keqiang, will replace 65-year-old Lou, who has held the job for a little more than three years, according to an official Xinhua News Agency report. There was no news on what post, if any, Lou will go on to take.
China's reformist finance minister Lou Jiwei fired while PM Li Keqiang is on visit to Russia. https://t.co/ICzn92p4go
— Carl Bildt (@carlbildt) November 7, 2016
Lou oversaw a restructuring of local-government finances that helped reduce the cost of a record amount of debt run up by provinces and cities that binged on spending after the global financial crisis.
Xiao Jie, who has worked behind the scenes for much of his career, must now tackle the nation’s ballooning debt… https://t.co/DSbGP8oyZ6
— IvanZhai (@ivanzhai) November 9, 2016
The Finance Ministry’s top job now goes to a former head of the tax administration who must grapple with challenges including forging a relationship with a new U.S. Treasury Secretary in a global environment with rising protectionist sentiment.
“The biggest challenge remains to broaden the local governments’ narrow revenue base,” said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “Reliance on land sales has been a major culprit behind many issues such as the property frenzy. So far, no finance minister seems to have tackled this issue well.”
VIDEO: Lou Jiwei at his reformist best. Is he a victim of internal CCP politics?
With China’s monetary policy shifting to a neutral stance, the Finance Ministry has been taking on more of the onus to keep the economy humming, through funding projects and expanding the fiscal deficit.
There was no immediate sign of a change in status for central bank Governor Zhou Xiaochuan, who has been in office since December 2002 in a tenure that’s coincided with multiple finance ministers.
The news from the Standing Committee of the National People’s Congress, the nation’s top legislature, came in a one-line statement. The announcement follows a plenum of top Communist Party officials last month, where President Xi Jinping was declared as the “core” leader of China, a designation that underscored his strengthening authority.
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