China:Personnel change will not alter fiscal policy stance

The Standing Committee of National Peoples' Congress announced today that Mr.Lou Jiwei is to be replaced as Finance Minister by Xiao Jie, a former tax chief. Webelieve this is an ordinary move of the scheduled personnel reshuffle in thegovernment administration every five years, and will not have any material impacton China's fiscal policy stance. With the economy still facing multiple headwindsincluding weakening external demand, private sector weak sentiment and theuncertainty in the property market, more aggressive fiscal expansion, likely in theform of higher infrastructure investment growth, more tax and fee cut, is expectedto continue in 2017. In addition, the new minister is also likely to continue to pushforward the unfinished fiscal and taxation reforms, including aligning central andlocal governments’ revenue and spending responsibilities, improving localgovernment budget management, completing VAT reform, as well as moreconcrete pipelines on introducing real estate tax and adjusting individual incometax.