China replaces high-profile finance minister in surprise move

7 Nov 16

China has replaced its internationally renowned finance minister in a surprise reshuffle that has caught many observers off guard.

The removal of Lou Jiwei, an outspoken reformist who is held in high esteem around the world, was announced today by the Standing Committee of the Chinese parliament, along with the appointment of a number of state security and civil affairs ministers.

He will be replaced by Xiao Jie, who has been serving in China’s finance and tax departments for three decades, but is comparatively unknown.

Lou on the other hand is credited with reining in runaway debt in China’s local authorities by encouraging them to borrow through bond issuances and has helped steward the country’s economy through a bumpy transition period in recent years.

China is attempting to rebalance its economy away from manufacturing and exports and towards domestic consumption and services – a transformation that will bring more sustainable growth in the future.

But as the International Monetary Fund has noted, while necessary, this process has also been painful.

China’s economy grew at an annual rate of just 6.7% in the first three quarters of this year. While still impressive when compared to the world’s lethargic, western economies, this is relatively poor for China and its slowest growth rate in a quarter of a century.

The slowdown meant China was knocked off the top spot as the world’s fastest growing major economy by India earlier this year.

The 65-year-old Lou was unlikely to have been reappointed when the next term of China’s government begins in 2018 due to his age, however his sudden departure took many analysts by surprise.

It is unclear what will happen to the policies he had been advocating, some of which are controversial. They include the introduction of a property tax, which has been fiercely opposed by urban property holders.

China’s president, Xi Jinping, may be trying to position his allies in key posts ahead of the party congress next year, which will determine the make-up of the upper echelons of the Communist Party. 

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