China names Lan Fo’an as finance minister to tackle debt risks

CHINA named Lan Fo’an as finance minister to replace Liu Kun, giving him responsibility for implementing a plan to diffuse local government debt risks.

Lan’s appointment was reported by state broadcaster CCTV on Tuesday (Oct 24). The move was widely expected after China last month named Lan as the Communist Party chief of the finance ministry.

The appointment comes at a crucial time for China’s fiscal system. China’s government finances have become more reliant on borrowing over the past decade due to massive tax cuts and a weakening property market. At the same time, Beijing is under pressure to increase spending on social welfare to meet the needs of an ageing population and more sophisticated economy.

As finance minister, Lan will likely play a role in helping decide whether China should increase the official deficit, which is usually set at 3 per cent of gross domestic product in most years, and the annual quota given to local governments to issue bonds for investment projects. The finance ministry has generally taken a conservative stance on government borrowing.

The post of finance minister is less powerful in China than in other major economies. Lan is not a member of the Politburo, a group of the Communist Party’s top 24 officials.

Lan, 61, is a native of the wealthy province of Guangdong in China’s south bordering Hong Kong. He spent most of his career in the Chinese province as a government official, eventually appointed vice-governor in 2016.

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He started his career as a clerk at the finance ministry from 1985 to 1988, and went on to serve as Party chief of the Guangdong provincial audit office before serving in other provincial posts.

China’s President Xi Jinping has close family associations with Guangdong, his father having served as the top official there in the 1970s. Liu, the outgoing finance minister, also spent most of his government career in Guangdong.

From March 2017 to April 2021, Lan served as a member of the top group of Communist officials overseeing the southern island province of Hainan, which has been used as a testbed for reforms to tax and housing policies. He also headed the party’s anti-graft body in the province.

He was made governor of the northwestern province of Shanxi in 2021. There he oversaw the province’s difficult transition away from reliance on coal-production into new sectors like renewable energy and data storage. BLOOMBERG