China’s likely finmin choice a win for reformists
By Wei Gu
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
China’s likely next finance minister could be a win for reformists. Lou Jiwei, the head of sovereign wealth fund CIC, is tipped for the job come the next round of leadership changes. He held one of the most global jobs in China’s establishment, and has been a champion for fiscal and other changes. Were he promoted, it would strengthen the pro-reform streak in China’s consensus-driven political machine.
A life-long bureaucrat and former deputy finance minister, Lou has had a taste of how global markets work at China Investment Corp., which manages $400 billion of China’s foreign currency. It wasn’t pain-free. Early investments in U.S. private equity firm Blackstone and Morgan Stanley lost half their value. But CIC seems to have learned from its mistakes, and bets on resources have performed better. It generated a return of 11 percent in 2010.
Lou’s promotion would see the reformist camp gain ground. Lou worked under former Premier Zhu Rongji, the “economic czar” who restructured China’s state-owned companies in the 1990s. Guo Shuqing, another Zhu protégée, has launched a series of changes after becoming the head of the securities watchdog a few months ago. China’s finance ministry needs some fresh thinking. Local governments are deep in debt, and digging them out will require sweeping changes to the tax system and bond markets.
Promoting Lou also fits Beijing’s ambition to play a more active role in global finance. The finance minister used to be a largely domestic role, overseeing fiscal budgets and tax policies. But the G20’s high-profile finance ministers’ meetings have added an outward-facing dimension. CIC under Lou has hosted a global sovereign wealth fund conference, while Lou has appeared at international forums and penned articles calling for the opening of China’s capital account.
One man can only do so much. China’s finance ministers usually play second fiddle to a vice-premier in charge of economic affairs. It also remains to be seen if Lou has the stomach for the tough reforms he has advocated in the past. But if Lou does get the call to move upstairs, it would be a positive signal that Beijing is serious about bolder reforms.