China revives ruling party control over financial supervision
- The ruling Communist Party of China is establishing commissions to oversee finance and technology, state media announced Thursday.
- The changes come as Chinese President Xi Jinping sees party unity as crucial to rebuilding the country.
- Beijing has not yet announced who will head the new party commissions.
People pose with the flag of the Chinese Communist Party during a visit to the Museum of the Communist Party of China in Beijing on March 3, 2023, ahead of the opening of the annual session of the National People’s Congress on March 5.
Greg Baker | Afp | Getty Images
BEIJING – The ruling Communist Party of China is establishing commissions to monitor finance and technology, state media announced Thursday.
The changes come as Chinese President Xi Jinping sees party unity as crucial to rebuilding the country. That contrasts with a tendency of Chinese leaders in recent decades to delegate more power to the government and its ministries.
A new “central finance commission” is set to strengthen the party’s “centralized and unified management of financial work,” state media said Thursday in Chinese, according to a CNBC translation. The commission is responsible for high-level planning within financial stability and development, the report states.
The Chinese government’s annual legislative meeting this month underscored that addressing financial risk is a priority for policymakers this year.
The report said the new commission’s administrative office will take over the responsibilities of the State Council’s Finance Committee for Financial Stability and Development — a group once overseen by the largely retired Liu He and now disbanded.
Alongside the administrative office, a “central financial work commission” will be created to focus on ideological and party-related work in the financial industry, state media said.
While state media did not specify, a Financial Labor Commission of the same name had been established in the wake of the Asian financial crisis in 1998. The commission was disbanded after about five years, leading to the establishment of the now-defunct Chinese banking regulator in 2003.
It is unclear how the commission’s future work will compare with history.
Back in the late 1990s and early 2000s, the Central Financial Work Commission helped streamline financial regulation and supervision — by minimizing the influence of powerful interest groups on regulators, said Sebastian Heilmann, a professor of political economy in China at the University in Trier. in a paper. He later became the founding president of the Mercator Institute for China Studies.
“But the hierarchical institutions of party control were unable to introduce market-based incentive structures for financial managers and failed to suppress economic mismanagement and corruption,” Heilmann wrote in 2004. “Furthermore, they caused friction with the emerging new forms of corporate governance and the growing the activity of foreign investors.”
Thursday’s announcement included previously released details of plans to restructure the State Council – the Chinese government’s top executive body – with the creation of the Central Science and Technology Commission.
The responsibility of this party commission is borne by the restructured Ministry of Science and Technology.
The changes in the Cabinet of Ministers created a National Financial Regulatory Administration to oversee most of the financial industry – except for the securities industry. The plan also changed the designation of the China Securities Regulatory Commission in the State Council from one similar to the Council’s Development Research Center to that of the Customs Bureau.
Beijing has not yet announced who will head the finance administration or the new party commissions.
The changes, which were announced on Thursday, will come into force at national level by the end of this year.
Other new commissions include groups to oversee the party’s work in industry organizations, and affairs in Hong Kong and Macao, state media said. Beijing has tightened control over the regions, which – under the “one country, two systems” structure – enjoy freedoms that do not exist on the mainland.
Xi — president of China and general secretary of the party — has consolidated his power and overseen an increased party presence in the economy, including among non-state-owned enterprises.
The new commissions are part of the party’s central committee, which has around 200 members. From these members comes the core leadership – the Politburo and its standing committee.
Membership changes are made every five years at party congresses, the last of which was held in October. At that congress, Xi paved the way for his unprecedented third term as president and packed party leadership with loyalists.