Liu He — a name to remember


Liu He, a key adviser to Chinese President Xi Jinping known for guiding economic policy behind the scenes, appears destined to occupy more of the spotlight. The 65-year-old Cultural Revolution survivor turned Harvard-educated technocrat rose to prominence by doing a series of crucial jobs quietly. Now, analysts say the stage is set for him to become Xi’s key lieutenant tasked with preventing a financial meltdown. On Wednesday, it was announced that a new committee charged with corralling China’s disparate financial regulators into concerted action was led by 71-year-old Vice Premier Ma Kai. According to Communist Party conventions, Ma is due to retire soon, leaving Liu — freshly appointed to the Politburo — the obvious choice for the role. “Liu will be like a Chinese version combining both Larry Summers and Ben Bernanke, plus the chairman of the president’s economic council,” according to Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “He will not only oversee overall financial markets including monetary policy and financial supervision, but also the relevant fiscal and reform policy.”

With an economy-wide debt level approaching 3x GDP, comprised mostly of a complex web of corporate and household borrowing, China must ease its addiction to credit without creating a collapse in asset values that would seriously hamper the economy. A member of Xi’s inner circle, Liu has played a behind-the-scenes role as director of the Communist Party’s general office of the Central Leading Group for Financial and Economic Affairs, which is chaired by Xi himself. He’s also been vice chairman of the National Development and Reform Commission, the government’s top economic planning body. While Liu has avoided the spotlight, many economists regard him as the voice behind an anonymous missive on debt published in the People’s Daily in May 2016. The Communist Party newspaper published the comments from an unnamed “authoritative person,” who said China must face up to its nonperforming loans and other risks associated with soaring debt.

Bloomberg annoyingly hides the “authoritative person” bit behind a paywall. Here’s a bit on that missive from UBS.

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