Reform, caution for China's economic team
Gao Hucheng, 61, will be Commerce Minister after the National People's Congress approved his appointment in a vote in Beijing. Xu Shaoshi, 61, will head the National Development and Reform Commission, the economic planning agency.
The leadership line-up is a mix of "activist reformers" such as Mr Zhou and Mr Lou and more cautious officials like Zhang Gaoli, the Politburo Standing Committee member today appointed as the most senior Vice-Premier, according to Yukon Huang, a former World Bank country head for China. At stake is the speed of policy moves to contain credit and property-price risks, deepen a shift towards free markets, and limit a slide in growth after last year's 7.8 per cent expansion, the least since 1999.
"The short-term challenge is how to suck the oxygen out of shadow financing and the property market without sucking the oxygen out of the economy," said Alistair Thornton, a Beijing-based economist at IHS Inc. "Long-term, it's about how to reduce the state's hold over the economy, which increasingly is jeopardising the sustainability of growth."
Politburo members Wang Yang, the former Communist Party secretary of Guangdong, Liu Yandong and former state planner Ma Kai were also named as vice-premiers. One of those officials, who are ranked higher than ministry heads, is likely to serve as counterpart to US Treasury Secretary Jacob Lew, due to visit Beijing on Tuesday and Wednesday.
The world's second-biggest economy faces a rising risk of a financial crisis because of excessive credit, elevated property prices, declines in the labour force and limited productivity gains, Nomura Holdings said. A slowdown in "reform momentum" after China joined the World Trade Organisation in 2001 is holding the nation back, the investment bank said.
The government has avoided difficult changes "such as moving to a fully market-based monetary policy framework and opening up the service sector that is monopolised by the state-owned enterprises," said Zhang Zhiwei, chief China economist at Nomura. "The key to China's future is reform, which usually only happens when the pressure to act has built to intense levels."
The Shanghai Composite Index is down more than 6 per cent from this year's February 6 peak, on concerns that monetary tightening and property curbs will slow expansion.
Mr Zhou's role may signal that the new Communist Party leadership will press on with loosening controls on interest rates and expanding international use of the yuan. Mr Li became Premier on Sunday, while Xi Jinping replaced Hu Jintao as president on March 14.
Mr Lou, 62, may be the new appointee with the highest international profile, after overseeing purchases including a stake in Morgan Stanley as founding chairman of sovereign wealth fund China Investment Corporation. In January this year, he said the fund was trying to cut an "over-reliance on US debt".
"Lou will enhance China's influence in multilateral institutions," said David Loevinger, former senior co-ordinator for China affairs at the US Treasury Department.
Frequently Asked Questions about this Article…
The article says Premier Li Keqiang filled out his economic team by naming Lou Jiwei as Finance Minister and keeping Zhou Xiaochuan as central bank governor. Gao Hucheng was approved as Commerce Minister and Xu Shaoshi will head the National Development and Reform Commission. Zhang Gaoli was appointed the most senior Vice‑Premier, and Wang Yang, Liu Yandong and Ma Kai were also named vice‑premiers.
According to the article, retaining Zhou Xiaochuan may signal the new leadership will press on with loosening controls on interest rates and expand the international use of the yuan, implying potential gradual moves toward a more market‑oriented monetary policy.
The article notes the lineup mixes 'activist reformers' like Zhou and Lou with more cautious officials such as Zhang Gaoli. Analysts quoted say the mix affects how quickly China can tackle credit and property risks, deepen market reforms and reduce state control over the economy.
Nomura and other commentators in the article highlight risks including excessive credit growth, elevated property prices, declines in the labour force and limited productivity gains. These factors raise the risk of financial stress if reforms and policy tightening are mis‑timed.
The article quotes an economist saying the short‑term challenge is to 'suck the oxygen out of shadow financing and the property market without sucking the oxygen out of the economy.' In practice the worry is that monetary tightening and property curbs could slow expansion and weigh on market sentiment.
The article points out Lou Jiwei has a high international profile from overseeing the China Investment Corporation as founding chair, including purchases such as a stake in Morgan Stanley. It also notes he has advocated reducing reliance on US debt and may boost China's influence in multilateral institutions.
The article states the Shanghai Composite Index was more than 6% below its February 6 peak, a pullback attributed to investor worries that monetary tightening and property market controls will slow economic expansion.
Based on the article, investors should watch the pace of reform and policy moves on credit, property and interest‑rate liberalisation, monitor signals about yuan internationalisation, and be aware of the structural risks flagged by analysts (credit excesses, property prices, labour force and productivity constraints) that could affect growth and market volatility.
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