June 23, 2018

China’s Communist Party Centralizes Power Over Finance and Pollution Control

Advertisement

Supported by

Image
Liu He at the National People’s Congress in Beijing last week. Mr. Liu has emerged as President Xi Jinping’s right-hand man in overseeing the economy and financial system.CreditWang Zhao/Agence France-Presse — Getty Images

BEIJING — The Chinese government said on Tuesday that it planned to overhaul supervision of the country’s debt-ridden financial sector, its environmental regulators and other essential government agencies in a broad move intended to further consolidate the Communist Party’s hold on official levers of power.

Premier Li Keqiang asked the National People’s Congress, the country’s legislature, to approve a plan that would combine China’s banking and insurance regulators in an effort to bolster their ability to monitor financial institutions. At the same time, both agencies would relinquish some of their broad policy responsibilities to China’s central bank, which would acquire an even greater role in preserving financial stability in what is now the world’s second-largest economy.

The plan, which is set for essentially automatic approval by the legislature in the coming days, would also take many responsibilities away from the National Development and Reform Commission, a bastion of central economic planning and heavy industry, and from a variety of other, older commissions and bureaus often perceived as cozy with the industries they regulate.

The moves could consolidate bureaucracies that have long overlapped, and at times clashed, hindering effective policy.

But more broadly, the proposals are part of a plan that President Xi Jinping laid out last month aimed at strengthening the top-down control of the Communist Party. The plan released on Monday focused on government reorganization, but Mr. Xi and other officials have stressed that any changes are intended to strengthen, rather than dilute, party control.

Liu He, President Xi’s right-hand man in overseeing the economy and financial system, outlined the party’s central role in the reorganization in a lengthy statement published on Tuesday morning in People’s Daily, the official mouthpiece of the Chinese Communist Party. Mr. Liu, an economist, was promoted to the party’s Politburo last year.

“Strengthening the party’s overall leadership is the core issue,” he wrote, alluding to a famous Mao Zedong saying. “In the party, government, military, and civil sciences, in the east, west, south, north and center, the party leads all.”

In other changes, control of the country’s forests grasslands and waterways would be given to a new superministry for natural resources. The existing environmental protection agency would be broadened into a larger ministry for ecological and environmental protection.

The plan unveiled on Tuesday calls for merging the China Banking Regulatory Commission and the China Insurance Regulatory Commission. But it falls short of widely discussed plans over the past few years of the possible creation of a financial super-regulator that would also include China’s central bank and the China Securities Regulatory Commission.

The securities regulator oversees the country’s stock markets and competes for jurisdiction with the other banking and insurance agencies for oversight of a large gray area of investments that combine aspects of debt and equity. The central bank seeks to maintain the overall stability of the financial system.

The intellectual justification for the merger of just the banking and insurance regulators, Chinese experts said in interviews over the last two weeks, is to create a single regulator for financial institutions that accept money from the public and invest it with guaranteed rates of return. But the China Securities Regulatory Commission needed to stay separate from the new banking and insurance agency, they suggested, because its role involves overseeing markets, in which customers know that they are taking a risk that they may not recover their investments.

But some Western experts have tended to recommend a broader combination of regulatory agencies. They have warned that Chinese financial institutions like Anbang Insurance Group, recently taken over by the central government after it embarked on a program of feverish overseas investment, have tended to exploit gaps in regulatory responsibility between the agencies.

Mr. Xi did create a lightly staffed financial supervisory commission last summer, which Mr. Liu is expected to take charge of in the coming days, that oversees all the regulatory agencies. Alicia Garcia-Herrero, an economist in the Hong Kong office of Natixis, a French financial institution, said that the limited financial regulatory consolidation set forth on Tuesday would leave that commission with a lot of power.

“The beauty of this more fragmented model for Xi is that he is still the final overseer through the oversight commission he created,” she said.

The restructuring will also create a new, separate National Market Regulation and Administration Bureau to take over responsibility for registering and supervising companies, food and drug inspection, and price supervision. The new bureau will also grab control over antimonopoly actions from the Ministry of Commerce and another, smaller government agency.

China’s industrial takeoff and feverish urban growth have created dangerous levels of air, water and soil pollution, and placed deepening strains on land and water resources. The reforms proposed creating two superministries to take on those problems: a Ministry of Natural Resources and a Ministry of Ecology and Environment.

The Ministry of Natural Resources will gain power over urban and township planning, as well as management of water, grasslands, forests, wetlands, and maritime resources.

The new Ministry for Ecology and Environment will take over responsibility for climate change and greenhouse emissions policies, which were previous under the National Development and Reform Commission. The new environmental super-ministry will also take over antipollution tasks previously handled by the ministries of land and of water resources, leaving them further weakened.

Related Coverage

Advertisement

Article source: https://www.nytimes.com/2018/03/12/business/china-consolidates-power-financial-industry.html?partner=rss&emc=rss

Speak Your Mind