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China is restoring control over the ruling party’s financial oversight

by SuperiorInvest

People pose with the flag of the Communist Party of China during a visit to the Museum of the Communist Party of China in Beijing on March 3, 2023, before 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 a finance and technology oversight commission, state media reported Thursday.

Changes are coming as the Chinese president You are Jinping he sees unity in the party as essential to building the country. This contrasts with the tendency of Chinese leaders in past decades to delegate more power to the government and its ministries.

New “Central Finance Commission” is ready to strengthen the party’s “centralized and unified leadership over financial work,” state media said in Chinese on Thursday, according to a translation by CNBC. The Commission is responsible for high-level planning in the area of ​​financial stability and development, the report said.

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

The report states that the administrative office of the new commission will take over the responsibility of the Financial Stability and Development Committee of the State Council – a group once overseen by the essentially retired Liu He and now disbanded.

Alongside this administrative office, a “Central Financial Work Commission” will be set up to focus on ideological and party work in the financial industry, state media said.

While state media did not elaborate, a financial work commission of the same name was established after the 1998 Asian financial crisis. The commission was disbanded after about five years, leading to the establishment in 2003 of the now defunct Chinese banking regulator.

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

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

“However, hierarchical institutions of party control have been unable to introduce market-based incentive structures for financial managers and have failed to curb financial mismanagement and corruption,” Heilmann wrote in 2004. increasing activity by foreign investors”.

Restructuring of the Technical and State Council

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

The responsibility of this party commission rests with the restructured Ministry of Science and Technology.

State Council changes set up the National Financial Regulatory Authority to oversee most of the financial industry – with the exception of the securities industry. The plan also changed the designation of the China Securities Regulatory Commission under the State Council from a similar committee to a development research center to a customs office.

Read more about China from CNBC Pro

Beijing has not yet announced who will head the financial administration or the new party commissions.

The changes announced on Thursday are due to take effect nationally by the end of this year.

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

Xi — China’s president and party general secretary — has consolidated his power and overseen an increased party presence in the economy, including non-state-owned enterprises.

The new commissions are part of the party’s central committee, which has about 200 members. From these members comes the main leadership — the Politburo and its Standing Committee.

Membership changes are made every five years at party conventions, the most recent of which was held in October. At this congress, Xi paved the way an unprecedented third term as president and loaded party leadership with loyalists.

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