Handing this award to China could be viewed as a somewhat awkward gesture. The country’s political elite is a consensus-driven machine. Decisions that affect its economy and finances tend to be made by the central Politburo and a wealth of subordinates, rather than by a team of trusted financial engineers working under the authority of a single, financially refined politician.
Lou Jiwei, though, is different from the average Chinese politician — and a far cry from many previous finance ministers. He is a politician by instinct, having served before as vice-minister of finance and vice-governor of the southern province of Guizhou. But he is also financially literate, having worked for four years as chairman and CEO of China Investment Corp., the sovereign wealth fund that manages a chunk of the country’s savings.
He is also the right man for the job in a country that is a few years into a decade-long transition from an export-based industrial machine to a more balanced economy driven by services and internal consumption. That transition is likely to be painful — economists warn that growth may slow, with a few predicting a hard landing as China seeks to slowly deflate a credit and housing bubble, and wean the economy off its dependency on fixed asset investment.
MODERN FINANCIAL TECHNOCRAT
Lou is the embodiment of the modern financial technocrat, a non-ideological thinker less wedded to either Marxist or stimulus-driven dogma than many of his peers or predecessors. “Lou is an advocate of allowing the growth target to slow gently,” says Andrew Polk, resident economist at The Conference Board China Center for Economics and Business in Beijing. “He believes that a mixed and well balanced economy is good for the country’s finances. I’d place him well within the confines of the ‘reformist’ camp, along with the likes of [central bank governor] Zhou Xiaochuan and [former securities regulator] Guo Shuqing.”
Elected in March 2013, he is part of the generation of politicians headed by president Xi Jinping and premier Li Keqiang.
Officials at the International Monetary Fund and the World Bank Group, interviewed by Emerging Markets, describe Lou as one of the most reform-minded Chinese finance ministers in many years. “He is pushing ahead with some of the country’s most economically and politically difficult reforms,” says one leading official at the IMF. Another notes that Lou is unusual among finance ministers in that he “appears to wield more direct decision-making authority than many of his predecessors”.
Analysts say Lou is committed to overseeing an intricate, multi-year rebalancing programme. “More than anyone, he wants to see the economy become far more geared toward consumption than production,” says a leading Beijing academic. “He isn’t a fan of excessive stimulus to boost short or medium-term economic growth, of the type we saw in 2009.”
In late September, the finance minister pledged not to alter his overall economy policy in reaction to slowing industrial output, tempering hopes for an aggressive easing of policies.
Lou added that that economic growth remained “well within the government’s comfort zone”. Earlier this week, the World Bank tipped gross domestic product to come in at 7.4% this year, and 7.2% in 2015. Earlier this week, the IMF estimated that China had overtaken the United States as the world’s largest economy, adjusted for the mainland’s lower cost of living.