Institutional Reform Enhances Role of Chinese Gov't

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Last updated at: (Beijing Time) Monday, April 07, 2003

Institutional Reform Enhances Role of Chinese Gov't

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The State Council restructuring scheme, adopted by the 10th National People's Congress last month, aims to further promote the smooth functioning of the government based on the achievements of institutional reform in the past five years.

While keeping the government structure generally stable, the latest reform measures focus on solving prominent administrative problems concerning economic and social development.

The government initiated dramatic institutional reform in 1998. That year, the number of State Council departments was cut from 40 to 29, while staff numbers were cut in half, from 32,000 to 16,700. Similar reforms were also carried out in local government agencies.

The five years of institutional reform yielded great achievements, as indicated by the breakthroughs made in separating administration from enterprise management and improving government management and its style of working.

With the advancing economic development and changed environment in China and abroad, especially since China joined the World Trade Organization in December 2001, the current government structure and functions need further reform.

It was in this context that the latest restructuring plan arose. It may be deemed mild in the sense that it keeps the general structure of government bodies unchanged, but it is far-reaching in promoting the smoother operation of government functions.

In this round of restructuring, the number of ministerial-level departments was reduced from 29 to 28.

The State Asset Management Commission is one of the new bodies created.

The establishment of the new commission is expected to bring the oversight of State assets under one body. Several government departments used to be responsible for overseeing State assets but this often resulted in a situation where no department was really responsible.

The central government is to become responsible for overseeing large State enterprises where the lifeline of the national economy or national security, infrastructure and important natural resources are involved.

As its first step, the new commission will supervise State assets in enterprises owned by the central government. There are 195 such enterprises. The total number of enterprises comes to 12,000 if their subsidiary companies are taken into account.

The new commission may delegate responsibility for the operations of a State enterprise to its board of directors. At the same time, the commission should sign contracts with the board to specify the latter's responsibilities in preserving and increasing the value of State assets.

The commission should perform its duties as an investor as stipulated in the company law and keep its hands out of any other affairs. That is, it should not interfere in the administration of enterprises' business activities.

The establishment of the commission will provide a reference for provincial and municipal governments to organize their own State asset-management bodies. The local management bodies will be established after the relevant rules and regulations regarding State assets are worked out.

The reorganization of the State Development Planning Commission into the State Development and Reform Commission is aimed at strengthening the government's macroeconomic control.

The functions of the former Structural Reform Office under the State Council have been incorporated into the new development commission. This does not mean that reform will be sidelined or weakened. On the contrary, it means it will be co-ordinated and developed.

Reform and development are, in fact, closely related to the advance of the market economy. Reform measures aimed at breaking up monopolies and introducing competition - in sectors such as energy, telecommunications and civil aviation - have been carried out in parallel with the development of these sectors and their industrial and corporate restructuring. Reform measures that do not take development into account can hardly be efficient.

Previously, the functions of the government departments in charge of macroeconomic control overlapped and were redundant to a certain extent. This had dampened the efficiency of macroeconomic control measures. The establishment of the new development commission is aimed at ending such a situation.

The functions of the former State Economic and Trade Commission in guiding economic development, such as drawing up industrial policies, have also been incorporated into the new development commission.

The commission will be responsible for the comprehensive study and formulation of policies on economic and social development and for guiding reform of the overall economic system.

The functions of the former State Development Planning Commission in managing microeconomic activities, such as organizing the export and import of agricultural produce and supervising pricing, have been transferred to other government bodies after it was reorganized into the new commission. But some functions are retained for the new commission for microeconomic management, such as the examination and approval of key projects. This is necessary at the current stage of development, though the management method needs to be improved.

The establishment of the China Banking Regulatory Commission is in line with the country's financial situation. The banking commission is to take over some supervisory functions from the People's Bank of China, the central bank. However, this does not mean that the central bank will no longer carry out supervision. The central bank, while drawing up and implementing monetary policies, will also supervise financial activities such as cash flow and the entry and exit of foreign reserves.

Financial supervision is not yet sufficient, instead of being too much. A further supervisory body means a further "firewall."

The establishment of the Ministry of Commerce was also urgently needed. For a long time, internal and foreign trade were under separate management, which is no longer in line with the trend towards their integration since China became a full World Trade Organization member, with the establishment of an open market and the need to absorb foreign investment.

The Commerce Ministry integrates the functions of the former State Economic and Trade Commission and those held by the former Ministry of Foreign Trade and Economic Co-operation.

The establishment of the Food and Drug Administration and the upgrading of the State Administration of Work Safety concerns people's fundamental interests. As people's living standards improve, they set higher requirements with regard to the safety and quality of food, medicine, tonics and make-up. The establishment of the new administration will ensure strict supervision.

Workplace safety is another important issue against the backdrop of frequent accidents, especially in coal mines. So the move is sure to get public support.

The author is a senior researcher with the Institute of Economics under the Chinese Academy of Social Sciences. (China Daily News)

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