China’s economic leadership team will retain several familiar faces, a surprise decision that suggests an emphasis on policy consistency as the economy’s recovery faces multiple challenges.
(Bloomberg) — China’s economic leadership team will retain several familiar faces, a surprise decision that suggests an emphasis on policy consistency as the economy’s recovery faces multiple challenges.
That’s according to analysts, who said the moves to keep central bank Governor Yi Gang, Finance Minister Liu Kun and Commerce Minister Wang Wentao in place were pragmatic ones that may boost investor confidence at a time of uncertainty.
It’s still not clear who will replace Liu He as President Xi Jinping’s top economic official, although He Lifeng, who was named a vice premier on Sunday, has been widely tipped for the post.
Here’s a look at what experts are saying about the leadership reveal:
Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd.
“It is a surprise to the market,” Zhang said of Yi’s reappointment. The 65-year-old had been expected to step down after reaching the retirement age for ministers and being left off a list of top ruling party officials last year.
“I think this is a pragmatic choice, as the new leaders need professional experts to handle the complicated economic and financial challenges,” Zhang added. “The leaders understand the top priority is to boost confidence. This decision is one step in that direction.”
Ming Ming, chief economist of Citic Securities Co.
“The lineup suggests policy consistency will be emphasized as that’s needed for the economic recovery and support of certain industries,” Ming said. “No matter who becomes the PBOC governor, the policy direction won’t change too much.”
Hui Feng, senior lecturer at Griffith University
Hui suggested Yi’s reappointment may be an “interim arrangement.”
One rumored candidate for the governor job, central bank veteran Yin Yong, was recently made major of Beijing, and Hui said Xi may want to find a replacement so Yin can move to the PBOC.
“It also suggests that the leadership is not confident with the other rumoured candidates at a time when stability is priority,” said Hui, co-author of “The Rise of the People’s Bank of China.” He noted the “dire challenges” the bank faces in the short term, “namely the ballooning of public debt and great uncertainties in global economic and geopolitical arena.”
Christopher Beddor, deputy China research director, Gavekal Dragonomics
“It’s a completely reasonable choice,” Beddor said of Yi. “The leadership was clearly debating among several candidates in the run-up to this decision, and opted to go for continuity.”
“That should somewhat reassure markets, given the major government and party restructuring that the PBOC will face over the coming months,” Beddor added, describing Yi as “more of a heads-down monetary-policy technocrat than an influential policy entrepreneur.”
Bruce Pang, chief economist for greater China at Jones Lang LaSalle Inc.
The reappointments “indicate continuity in fiscal and monetary policies, as the leadership is fully focused on improving the economy,” Pang said.
The priority that authorities are placing on economic development has “significantly increased” since the Communist Party Congress took place last year, he added.
Qian Wang, Vanguard Group Inc.’s chief economist for Asia-Pacific
The senior leaders of the State Council, China’s cabinet, are close allies of Xi who share “a lot of trust,” Wang said, suggesting that policy implementation will be better coordinated now.
The staying of “strong technocrats” like Yi and Liu should complement the lack of national experience of some of the new leaders, she added.
One problem for China in the past few years was that the policy decision framework “was highly centralized while the policy implementation framework was highly decentralized,” she said. “That caused a lot of uncertainty and ambiguity on the ground when policies are rolled out and left markets and businesses confused.”
(Updates with additional comments.)
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