China’s President Xi Jinping has appointed economist Liu He as the Vice Premier overseeing the Chinese economy. China is the second largest economy in the world after..
China’s President Xi Jinping has appointed economist Liu He as the Vice Premier overseeing the Chinese economy.
Background
China is the second largest economy in the world after USA. According to certain forecasts, its GDP growth is slated to overtake America’s GDP in another 10 years. A hub for the manufacturing industry, China is the fastest growing economy. Its economic growth has been over 10% for over 30 years.
However, in the recent years, China’s exponential growth has come at the cost of increased debt. According to statistics, its debt is more than 250% of the GDP and is much higher than the US. It is, however, lower than Japan, which remains the world’s most indebted leading economy. Experts have said that if China’s trajectory continues, then it will be looking at an economic slump sooner than later. China’s exporting prowess has fueled massive trade surpluses and tensions with the U.S.
Analysis
Celebrated economist and politician Liu He was appointed as the Vice Premier overseeing the Chinese economy by President Xi Jinping. He has been the Vice Chairman of the National Development and Reform Commission (NDRC), the deputy party group secretary of the NDRC. He is the chief of the General Office serving the Leading Group for Financial and Economic Affairs, headed by Party General Secretary Xi Jinping. During the latest Party Congress in China, he was promoted to the powerful Politburo. His elevated position in China’s political landscape became even more prominent when he gave the keynote address at the 2018 World Economic Forum in Davos.
He has now become one of Jinping’s top lieutenants and will now have the power to restructure a number of economic bodies within China. In addition to taking over economic reform, he will also be in-charge of maintaining good relations with US, which is China’s trading partner and geopolitical challenger. Even though Liu He is the most high profile Vice Premier who has been appointed, Han Zheng, Sun Chunlan and Hu Chunhua were also appointed as VPs.
“Frankly speaking, (Yi’s nomination is) a bit unexpected as he holds a relatively low political ranking as the alternative member of CPC Central Committee,” said Tommy Xie, China economist at OCBC Bank in Singapore.
“China is very hard to control, it’s a large country with strong regional identities and officials are not keen on being told what to do from outside,” said Rana Mitter, a professor of Chinese history and politics at Oxford university. “This is clearly an effort to try and centralise control as much as possible but the likelihood that you’ll get pushback is pretty high.”
Analysts and experts believe that he will become the country’s most powerful Vice Premier in two decades. Steve Tsang, director of the SOAS China Institute in London and author of China in the Xi Jinping Era said, “Liu is unlikely to put forth any plan which he thinks President Xi Jinping will not approve, or like. The team being put together looks like a strong one. They should be in a position to put in place a reform programme that seeks to rebalance the economy and reduce risk at the same time.”
Liu He has already established a rapport with Washington. In February, he met with authorities from the US to discuss the future of trade between China and the US.
Assessment
Our assessment is that Jinping has made the betterment of China’s economy as one of his key agendas for the nation’s future. Under his stewardship, Liu He will have to address a number of concerning issues that might affect Chinese economy that includes increasing bad debt. There are other fault lines and the Chinese economy is in a bit of a flux. There are fears regarding a real estate “bubble”. Some have even compared it to the sub-prime mortgage bubble in the USA that ultimately led to the 2008 financial crisis and the global recession. Liu He will also be playing a critical role in maintaining ties with America during a period when there are concerns of a trade war being sparked between China and the US.
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