NPC Update: China Reshuffles the Cabinet … in a Big Way

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Talking Points

<ul><li>Significant restructuring of the government was announced this week at the National People’s Congress (NPC); biggest reform since former Premier Zhu Rongji’s in 1998.</li><li>Eight ministries and seven commissions were eliminated or streamlined to create 26. This structure reflects President Xi’s priorities, allows for better coordination, and reduces turf wars. The biggest changes included:<ul><li>Environment: Two new ministries created; one dealing with climate and pollution and the other with natural resources. </li><li>Finance: Merged the banking and insurance regulators into one.</li><li>Tourism and Culture: New ministry created to focus on these two priorities.</li><li>Other: Veteran’s affairs, immigration, and emergency management all became new ministries. A new market supervision administration was created to focus on anti-monopoly and pricing related issues. Also, there will be a new office for foreign aid which will coordinate the major Belt & Road Initiative.</li></ul></li><li>The powerful National Development and Reform Commission (NDRC) seems to have been the biggest loser: parts of its environmental/climate, pricing, anti-monopoly, and natural resources portfolios were moved to other organizations.</li><li>This restructuring also should promote more consistent implementation of central-level policies by the provinces.</li></ul>

What’s Next

  • We all wait with bated breath for the new leadership line up to be announced likely on Monday, March 19 (or perhaps sooner for some positions). Liu He is a sure bet for the Vice Premier role covering finance and    trade, and is one of the top contenders for People’s Bank of China governorship. 
  • Wang Qishan will become Vice President and, as part of that role, will manage foreign affairs. There is talkof a new organization being created that would report to him and potentially be run by State Councilor Yang Jiechi, unless he is promoted to Vice Premier. Wang Yi, the current Foreign Minister, is also likely to be promoted and work under Wang Qishan.
  •  Traditionally, there are four Vice Premier positions, but that could change under President Xi. Others under consideration for Vice Premier include Yang Jiechi, Hu Chunhua, former Party Secretary of Guangdong Province, and Sun Chunlan, who is a former Party Secretary of Tianjin and would be the only female in the senior leadership, if selected.
  • Han Zheng, currently a standing committee member, will be the Executive Vice Premier.  

 

Emerging Trends

 

Media headlines are focused on the lifting of term limits for the President and Vice President and what that means, as well as the big cabinet reshuffling, understandably. Yet, there are a few trends for foreign companies to monitor as part of their government relations strategies including:

  • Reform and Opening Up: The momentum builds for China to announce major plans to open up further to foreign companies to mark the 40th anniversary of Deng Xiaoping’s historic reform and opening up policies. Premier Li said during his work report, “the country will further expand the scope and raise the quality of its opening up, improve the structure, layout, institutions, and mechanisms for opening up, and use high-standard opening up to generate high-quality development.” Every day there is a story in the Chinese media that there will be greater market access across a range of sectors, including banking, insurance, securities, telecom, senior care, medical services, education, and new energy vehicles.
  • Strengthening the Center: Xi has tackled center-provincial relations in many ways during his tenure by bringing power back to the center in recognition that the provinces were often ignoring or even undermining national policy (a tale as old as time). In a move that is a harbinger for further rebalancing of this relationship within the bureaucracy, the NPC announced that tax collection, for example, would be conducted by the central level State Administration of Taxation which will integrate with local tax authorities below the provincial level. 

We also see a rise in regionalism as a means to weaken the influence of provincial leaders and spur cooperation between a group of local officials, which reduces the possibility of corruption. There are three key regions that have been created: Xiong’an for the north (Beijing, Tianjin, Hebei), Yangtze River Delta in the east (Shanghai, Zhejiang, Jiangsu), and the Pearl River Delta in the south (Guangdong, Hong Kong, Macau) – and more ahead.

  • Government Structure Reflects Priorities: President Xi’s administration has announced three policy priorities for the five years ahead: reduce risk, alleviate poverty, and fight climate change and pollution. The new government structure reflects these priorities and should promote better coordination and implementation of the supporting policies. It is important to note, however, that much of the actual policy development will remain with the Party’s relevant leading groups – not by the government ministries or commissions. Their role will continue to be implementers.

Useful Link:

http://www.globaltimes.cn/content/1093038.shtml (for the comprehensive list of Ministries)

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