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China orders biggest regulatory revamp in decades

Bloomberg
Bloomberg • 4 min read
China orders biggest regulatory revamp in decades
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President Xi Jinping overhauled China’s bureaucracy as part of a sweeping push to make the economy more self-sufficient and resilient in the face of US efforts to prevent Beijing from obtaining advanced technology.

The plan released Tuesday strengthened oversight of its US$60 trillion financial system, created a new agency to manage data and restructured the Ministry of Science and Technology. The objective is to “better allocate resources to overcome challenges in key and core technologies, and move faster toward greater self-reliance in science and technology,” the official Xinhua News Agency said.

China will also cut the number of positions in central government departments by 5% and redistribute them in strategically important areas, according to the document released at the annual National People’s Congress legislative session. It didn’t release the total number of employees affected, a sensitive topic in China.

The drive comes as the US increasingly uses export controls, sanctions and other punitive measures to prevent China from obtaining technology that could give it an economic and military advantage, particularly in semiconductors and artificial intelligence. China is also facing a host of domestic economic challenges, with Premier Li Keqiang this week highlighting local government debts and woes in the property sector as key threats to financial stability.

Xi has made building a more efficient government one of the hallmarks of his decade in power. The percentage of jobs cut is the most since 1998, when the central government and state-owned enterprises were reorganized.

The downsizing plan sparked discussion on China’s Twitter-like Weibo platform, with some users wondering if the widely coveted public servant positions were no longer considered “iron bowls” that would ensure long-term job security. Oothers welcome the move, saying that local government agencies should follow suit.

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One of the main highlights of the overhaul was the creation of an enlarged national financial regulator that would take some duties away from the central bank. It marks the latest development in a decade-long effort to push for consolidation — or at least greater cooperation — among China’s financial regulators, and follows an earlier merger of the banking and insurance watchdogs.

The China Banking and Insurance Regulatory Commission will cease to exist after the overhaul, while the China Securities Regulatory Commission will be elevated to become a government agency directly under the State Council, according to the plan. The moves are aimed at “solving the long-standing conflicts and issues in the financial area,” it said.

Data Agency
China is also establishing a national bureau to police and protect data resources. The new agency could help Beijing tighten its grip over the valuable information gathered by swaths of the economy, including its internet industry, which became the target of a regulatory crackdown that reduced the market value of China’s tech giants by tens of billions of dollars.

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“National security concerns have brought the issue of data protection to the fore, on both sides of the divide,” said Tiffany Tam and Robert Lea, analysts with Bloomberg Intelligence. “While there are genuine concerns, the issue is becoming increasingly politicized.”

The US has blacklisted arguably all of China’s most advanced companies and research institutes in diverse fields from chips and supercomputing to the cloud and data mining. National champions including Huawei Technologies Co., Semiconductor Manufacturing International Corp. and most recently Inspur Group are banned from accessing American technologies.

“In the face of international tech competition and a severe situation of external containment pressures, we must further organize our technological leadership and management system to better coordinate our strength to overcome challenges on strategic core technologies,” the government document read. That will help China “accelerate the achievement of high-level technological self-reliance.”

Among other changes made to the government this year:

The National Health Commission, the top health regulator, will cede functions related to drafting policies to deal with an aging population to the Ministry of Civil Affairs, as part of efforts to develop a senior care industry for an increasingly graying population.

China moved the National Intellectual Property Administration up in the government hierarchy so that it’s directly overseen by the State Council, the cabinet.

The National Public Complaints and Proposals Administration, an official channel for the public to voice grievances, was put under direct management of the State Council, a change the government said would “better protect people’s fundamental interests.”

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