China is relaunching ruling party control of financial oversight

  • The ruling Chinese Communist Party is setting up commissions to oversee finance and technology, state media said on 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 chair the new party commissions.

People pose with the Chinese Communist Party flag during a visit to the Chinese Communist Party Museum in Beijing March 3, 2023 ahead of the March 5 opening of the annual session of the National People’s Congress.

Greg Baker | AFP | Getty Images

BEIJING – The ruling Chinese Communist Party is setting up commissions to oversee finance and technology, state media said on Thursday.

The changes come as Chinese President Xi Jinping sees unity among the party as essential to building the country. This contrasts with a tendency by the Chinese leadership 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 leadership over finance work,” state media said in Chinese on Thursday, according to a CNBC translation. The commission is responsible for high-level planning of financial stability and development, the report said.

The Chinese government’s annual legislative session this month emphasized that managing financial risks is a priority for policymakers this year.

According to the report, the new commission’s administrative office will assume the duties of the State Council’s Financial Stability and Development Committee — a group once headed by the essentially retired Liu He that has now been disbanded.

In addition to this administrative body, a “Central Financial Working Commission” is to be set up, which is to concentrate on ideological and party-related work in the financial industry, state media said.

While the state media didn’t elaborate, a finance working commission of the same name had been set up after the 1998 Asian financial crisis. The commission was dissolved after about five years, leading to the establishment of the now-defunct Chinese banking regulator in 2003.

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

As early as the late 1990s and early 2000s, the Central Financial Work Commission helped streamline financial regulation and supervision and minimize the influence of powerful interest groups on regulators, said Sebastian Heilmann, a professor of China’s political economy at the University of Trier in one Paper. He later became the founding president of the Mercator Institute for China Studies.

“But the hierarchical institutions of party control have failed to introduce market-based incentive structures for financial managers, and have failed to quell financial mismanagement and corruption,” Heilmann wrote in 2004, describing the increasing activity of foreign investors.

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

The tasks of this party commission are carried out by the newly structured Ministry of Science and Technology.

The State Council amendments established a National Financial Regulatory Administration to oversee most of the financial industry — except for the securities industry. The plan also changed the designation of China’s Securities Regulation Commission within the State Council from a designation similar to the Council’s Development Research Center to that of Customs Bureau.

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

The changes, announced on Thursday, are expected to take effect at the national level by the end of this year.

Other new commissions include groups overseeing the party’s work in industry associations and Hong Kong and Macau affairs, state media said. Beijing has tightened its control over the regions, which – under the “one country, two systems” structure – enjoy freedoms not found on the mainland.

Xi – President of China and general secretary of the party – has consolidated his power and ensured an increased presence of the party in business, including at non-state-owned companies.

The new commissions are part of the party’s Central Committee, which has around 200 members. From these members emerge the core leadership – the Politburo and its Standing Committee.

Membership changes every five years at party conferences, most recently in October. At that congress, Xi paved the way for his unprecedented third term as president and filled the party leadership with loyalists.

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