China revives ruling party control over financial supervision

  • The ruling Communist Party of China is setting up committees to oversee finance and technology, state media announced Thursday.
  • The changes come as Chinese President Xi Jinping sees unity among the party as essential to building the country.
  • Beijing has yet to announce who will head the new party committees.

People pose with the Chinese Communist Party flag 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 — China’s ruling Communist Party is setting up committees to oversee finance and technology, state media announced Thursday.

The changes come as Chinese President Xi Jinping sees unity among the party as essential to building the country. This contrasts with the tendency of Chinese leaders in recent decades to delegate more power to the government and its ministries.

A new “Central Finance Commission” will strengthen the party’s “centralized and unified leadership over financial work,” state media said in Chinese on Thursday, according to a translation from CNBC. The commission is responsible for high-level planning in financial stability and development, the report said.

The Chinese government’s annual legislative session this month stressed that addressing financial risk is a priority for policymakers this year.

The report said the new commission’s administrative office will assume the responsibilities of the State Council’s Financial Stability and Development Commission — a group that was once overseen by the essentially retired Liu He and has now been disbanded.

A “Central Financial Work Commission” will be established alongside that administrative office to focus on ideological and party-related work in the financial sector, state media said.

Although the state media did not specify, a financial working committee of the same name had been established in the aftermath of the 1998 Asian financial crisis. The commission was dissolved after about five years, leading to the creation of the now-defunct Chinese banking regulator in 2003.

It is unclear how the commission’s future work will relate to history.

In the late 1990s and early 2000s, the Central Financial Work Commission helped make financial regulation and oversight more streamlined — minimizing the influence of powerful interest groups on regulators, says Sebastian Heilmann, a professor of political economy of China at the University of Trier. in a newspaper. He later became founder and president of the Mercator Institute for China Studies.

“But the hierarchical institutions of party control were unable to implement market-based incentive structures for financial executives and failed to suppress financial mismanagement and corruption,” Heilmann wrote in 2004. “Moreover, they created frictions with the emerging new forms of corporate governance and the increasing activity of foreign investors.”

Thursday’s announcement included previously released details of plans to restructure the State Council — the top executive body of the Chinese government — with the establishment of the Central Science and Technology Commission.

The responsibilities of that party committee are shouldered by the restructured Ministry of Science and Technology.

The changes to the State Council created a National Financial Regulatory Administration to oversee most of the financial industry, with the exception of the securities industry. The plan also changed the China Securities Regulatory Commission’s designation within the State Council from one similar to the council’s Development Research Center to that of the Customs Agency.

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Beijing has yet to announce who will head the financial administration or the new party committees.

The changes announced on Thursday will take effect nationally by the end of this year.

Other new committees include groups that oversee the party’s work in trade associations and the affairs of Hong Kong and Macao, state media said. Beijing has tightened its 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 oversaw a greater party presence in the economy, including among non-state-owned companies.

The new committees are part of the party’s central committee, which has some 200 members. From those 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 took place in October. At that convention, Xi paved the way for his unprecedented third term as president and crammed the party leadership with loyalists.

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