A very Chi­nese reshuf­fle

Financial Mirror (Cyprus) - - FRONT PAGE - By Arthur Kroe­ber

The forces of mar­ket-ori­ented eco­nomic re­form in China seemed to take a hit on Mon­day when it was an­nounced that the tough-talk­ing fi­nance min­is­ter Lou Ji­wei was step­ping down from his post. Some Western me­dia re­ports sug­gested this was fur­ther ev­i­dence of an au­thor­i­tar­ian Pres­i­dent Xi Jin­ping tight­en­ing his grip on power and elim­i­nat­ing of­fi­cials who dis­agree with his statist, anti-mar­ket poli­cies. This is al­most cer­tainly an over-sim­pli­fi­ca­tion, if not an out­right dis­tor­tion. The prospects for China’s re­form agenda re­main cloudy, but Lou’s de­par­ture does not re­ally darken the skies.

Lou was just one of three min­is­ters who left their po­si­tions yes­ter­day (along with the min­is­ters of Civil Af­fairs and State Se­cu­rity); so far this year a to­tal of seven min­is­ters have been re­placed. Of these seven Lou was the old­est: he turns 66 in two months and is thus past the manda­tory re­tire­ment age for govern­ment min­is­ters. In re­cent decades re­tire­ment ages for govern­ment min­is­ters have been strictly en­forced. The sole ex­cep­tion is PBOC gov­er­nor Zhou Xiaochuan, who a few years ago was per­mit­ted to stay on be­yond the re­tire­ment age of 65 via the stratagem of be­ing awarded a post at a high-level state ad­vi­sory body, which gave him spe­cial sta­tus ex­empt from manda­tory re­tire­ment.

The sim­plest ex­pla­na­tion, there­fore, is that Lou is mov­ing on in ac­cord with well-estab­lished re­tire­ment rules, and did it at a fairly nor­mal time, af­ter a ple­nary meet­ing of the Party, when sig­nif­i­cant per­son­nel changes are of­ten rat­i­fied. (The Sixth Plenum of the cur­rent Party congress term con­cluded a cou­ple of weeks ago.) More­over, he may not leave the world of ad­min­is­tra­tion al­to­gether: it is ru­mored he will take over the Na­tional So­cial Se­cu­rity Fund, a quasi-govern­ment agency that has twice in the re­cent past pro­vided a perch for re­tired fi­nance min­is­ters. It’s true that a se­nior Party of­fi­cial re­cently said in pub­lic that re­tire­ment ages are in prac­tice flex­i­ble and not manda­tory, but this re­ferred specif­i­cally to Party, not govern­ment, po­si­tions.

Lou has al­ways been far more pop­u­lar with the Western me­dia than within the Chi­nese sys­tem. His views lie on the ex­treme free-mar­ket end of the spec­trum in Chi­nese of­fi­cial­dom. And he has never been shy about pub­licly de­nounc­ing poli­cies with which he dis­agrees, such as the 2008 la­bor con­tract law which he be­lieved had made China’s la­bor mar­ket too rigid. His un­abashed em­brace of Western­style free mar­ke­teer­ing, and his will­ing­ness to speak his mind dis­tin­guished him from the dreary monotony of Chi­nese lead­ers. He gave a great in­ter­view and made great copy.

But there have al­ways been plenty of peo­ple in­side the broader Chi­nese “re­form” tent who think Lou goes too far in ad­vo­cat­ing free-mar­ket ap­proaches, with­out tak­ing suf­fi­cient ac­count of the neg­a­tive im­pact on less ad­van­taged groups in so­ci­ety. And his loose-can­non ten­dency, viewed as an as­set by the for­eign me­dia, was a se­vere li­a­bil­ity within a Chi­nese sys­tem where mes­sage con­trol is all-im­por­tant. The con­trast with the PBOC’s Zhou is strik­ing: Zhou is a silky-smooth politi­cian whose pub­lic ut­ter­ances never ob­vi­ously de­vi­ate from the main line of govern­ment pol­icy. An ex­cep­tion to the re­tire­ment age could be crafted for him; but Lou had an­tag­o­nized too many peo­ple ever to get that deal.

Fi­nally, it’s worth noth­ing that while Lou swept into of­fice three years ago with bold, and gen­er­ally sen­si­ble, ideas about how to re­form China’s fis­cal sys­tem, his record of achieve­ment has been mixed at best. Ef­forts to re­struc­ture lo­cal govern­ment debts were widely re­sisted on the grounds that they im­peded growth, and Lou’s re­struc­tur­ing goal has been side­lined in fa­vor of sim­ply ex­pand­ing lo­cal­i­ties’ bor­row­ing author­ity. Progress on re­vamp­ing the tax sys­tem have also been slow. So it’s not as if Lou’s de­par­ture marks the un­timely end of a su­per­star re­former who was achiev­ing spec­tac­u­lar re­sults.

His suc­ces­sor as fi­nance min­is­ter, Xiao Jie, is a sea­soned fi­nance of­fi­cial with plenty of fis­cal ex­per­tise, and a rep­u­ta­tion for open­mind­ed­ness. He comes most re­cently from the State Coun­cil, where he held a se­nior po­si­tion in the sec­re­tar­iat and helped lead the most re­cent eco­nomic cen­sus. Lit­tle ev­i­dence sup­ports the idea that his is a ret­ro­grade, anti-re­formist ap­point­ment. It is true that the progress of eco­nomic re­struc­tur­ing re­mains a con­cern, and that eco­nomic pol­icy un­der Xi has un­der­gone a no­tably statist drift in the last year or two. The res­o­lu­tion of doubts over eco­nomic pol­icy di­rec­tion will hinge on high­level lead­er­ship changes at the Party’s 19th Congress a year hence, not on rou­tine cab­i­net shuf­fles to­day. Lou Ji­wei’s pas­sage may be lamented by the for­eign me­dia, but the timely re­tire­ment of an en­ter­tain­ing yet only mod­er­ately ef­fec­tive min­is­ter sends us no use­ful sig­nal about the prospects of the re­form agenda, one way or an­other.

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