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China replaces finance minister Lou Jiwei

xiao-jie
New Finance chief Xiao Jie

Shanghai, China | AFP |

China Monday replaced finance minister Lou Jiwei, state media reported, with some analysts predicting more fiscal stimulus in the world’s second-largest economy.

Lou was relieved of his duties and replaced by 59-year-old Xiao Jie, the deputy secretary-general of the State Council, or cabinet, Xinhua news agency reported without giving more details.

Lou, 65, had been the finance minister since March 2013, presiding over a stock market boom encouraged by authorities — followed by a rout in the middle of last year.

Citic Bank International chief economist Liao Qun told AFP that Lou’s replacement could be routine due to his age, but that the new finance minister could raise market expectations of tax cuts to spur the economy.

Beijing will continue its loose economic stance as it is under pressure to keep growth stable, Liao said.

But he added: “A new head could mean fiscal policies could play bigger roles in boosting growth and China could be more aggressive in fiscal policies, given it has already used monetary tools many times.”

China’s economy grew an annualised 6.7 percent in July-September, the same as the first two quarters.

The government has targeted 6.5-7.0 percent growth for the year, following 6.9 percent last year — the slowest rate in a quarter of a century.

In 2015 China cut its interest rate five times and several times lowered the amount of cash banks must set aside. It also cut the reserve rate once this year.

Lou’s successor Xiao, originally from the northeastern province of Liaoning, spent nearly two decades at the finance ministry and was appointed head of the State Administration of Taxation in 2007.

Other analysts argued that the new minister would mean little difference.

Raymond Yeung, chief greater China economist at ANZ Banking Group, told Bloomberg News: “This personnel change is not expected to change China’s fiscal policy.

“The government is still aiming to support growth through a deficit budget of 3 percent of GDP. Since Xiao has a good understanding of the tax system, the appointment can facilitate the continuity of tax reform.”

The stock market rose after the announcement, with the benchmark Shanghai index up 0.42 percent in early afternoon trading.

Lou, who is on the board of governors of the China-backed Asian Infrastructure Investment Bank, has been one of best-known names representing China’s economic views alongside central bank chief Zhou Xiaochuan.

Last month he spoke out on behalf of the G20 against populist politicians playing up anti-globalisation and anti-free trade sentiments, saying they were putting the world economy at risk.

While not mentioning US presidential candidate Donald Trump or other politicians by name, he identified populism as one of the most dangerous threats to the economy.

“Deep anti-globalisation populism has driven politicians to come up with their campaign slogans and try to win the votes and support. That has brought us uncertainty,” he said after meetings in Washington.

“We need to recognise some political risks such as the presidential election in some countries and in major economies,” he added.

China also announced Monday the replacement of state security minister Geng Huichang with Chen Wenqing, 56, who was previously at the ruling Communist party’s internal anti-corruption watchdog, Xinhua said.

 

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