China Elects New Economic Team As President Xi Kicks Off Second Term
China elevated a key confidante of President Xi Jinping to one of the top positions in government on Monday as Beijing cracks down on riskier financing and a debt to reduce systemic risks to the world’s second-largest economy.
The election of Liu He by parliament to be a vice premier also comes as the United States presses China to cut its trade surplus by $100 billion. Harvard-educated Liu, 66, was the most prominent envoy to visit Washington recently in a bid to prevent the outbreak of a trade war.
While most of the personnel changes on the economic team were widely anticipated, the choice of Yi Gang to take over as the new head of the People’s Bank of China (PBOC) was unexpected.
Yi is a vice governor of PBOC and a protege of outgoing chief Zhou Xiaochuan. His appointment is seen as pointing to continuity in monetary policy even as one of the world’s biggest central banks is gaining considerable new regulatory power.
The head of a newly merged banking and insurance regulator is expected to be announced on Monday. Reform-minded Guo Shuqing, 61, the current chair of the China Banking Regulatory Commission, is viewed as the top candidate to play that role.
The chief of a powerful new competition and food safety regulator will also be unveiled.
As Xi begins his second five-year term as president, Beijing is streamlining regulators and ministries to cut inefficiencies while expanding the remit of others such as the central bank to boost their policymaking powers.
“China’s ministries are giant, nationwide siloes and fiefdoms that never talk to one another. Hence, in order to accomplish anything major, the command must come from the top down; only they can get ministries to work together,” Cliff Tan, east Asian head of global markets research at Bank of Tokyo-Mitsubishi UFJ, said in a note.
“Such a setup nearly guarantees the continuation of power that is never devolved, otherwise nothing would get done.”
Liu has a deep understanding of the country’s economic issues, and was elected last October into the 25-member Politburo, the second-highest tier in Beijing’s political power structure after the seven-member Politburo Standing Committee,
Liu won a top Chinese economics study award in 2015 for his research on the global financial crisis, and is widely seen as masterminding Xi’s supply-side reforms which are cutting excess factory capacity and pivoting the economy away from low-value industries.
Liu, who speaks fluent English, gained a master’s degree in public administration at Harvard’s Kennedy School of Government in 1995.
He had been the head of the General Office of the ruling Communist Party’s Central Leading Group for Financial and Economic Affairs and a vice minister of the National Development and Reform Commission (NDRC) – China’s top economic planner.
