New finance chief 'to speed up fiscal reform'

At the same time Li called for more fiscal expenditure to improve people's livelihoods, and stricter supervision of public spending on government operations.

Although China's public revenue expanded from 5.1 trillion yuan ($820.6 billion) to 11.7 trillion yuan over the past five years, Lou's first task after he took the post was to tighten his belt.

Facing the rising demands on public expenditure, Lou's previous statements suggested that he would attach more importance to areas such as building the social security system.

Central government spending accounts for 20 percent of China's public expenditure, while the average level of member countries of the Organization for Economic Cooperation and Development was 46 percent in 2009.

Xie Yaxuan, a macroeconomics analyst with China Merchants Securities, said Lou's move involves restructuring the relationship between central and local governments, and will be the key element of China's fiscal reform over the next five to 10 years.

"But this is also where most of the resistance is, so however determined he is, it is still unknown whether he could succeed," Xie said.

As for measures to boost the economy, Lou said investment would still play a key role in driving growth before China's demographic bonus fades away.

He said investment, especially in infrastructure, would account for a large part of domestic consumption in the coming years, in order to accumulate enough wealth and avoid China "aging before it becomes wealthy".

"When it comes to economic transformation, investors would think of less investment and more consumption. But with Lou's appointment, this process may be longer than we thought," Xie said.

 

weitian@chinadaily.com.cn

 

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