Originally published, March 14, 2018
In 2017, China’s economy grew 6.9%. This growth contributed 30% to global economic growth, a fact that is quite impressive. Consistently, over the past decade, China has been able to expand its economy because it has relaxed the trade policies, and it has allowed foreign direct investment, facilitating trade.
On Tuesday, March 13, 2018 China held its 13th National People’s Congress in Beijing. Despite global economic, technological and military growth, President Xi Jinping and the ruling party announced a massive cabinet restructuring. The new cabinet will have 15 fewer government entities. The restructuring is part of a broad plan of the ruling party of China to reform the party, and state institutions. These moves and streamlining the size of the government are anticipated to make China more efficient and service-oriented.
This reform is clearly meant to shake up entrenched power and interests. Cutting bureaucracy has been a pursuit of many governments around the world. China is indicating that it is will implement a major overhaul and downsize its government.
Would this meet the criteria as “Draining the Swamp”?
The new Master Plan, the 8th since 1982, will create a government of twenty-six ministries and commissions, in addition to the China General Office of the State Council. Eleven of these government organizations are new or restructured. Twenty-one ministries, or commissions will be dissolved from the former government.
There will be eight new ministries including:
The State Market Regulatory Administration
The State Radio & Television Administration
The State Immigration Administration
Reducing Financial Downside Risk
The country’s top banking and insurance regulatory bodies will be combined into the China Central Bank. This move will tighten oversight of China’s $42 trillion banking and insurance sectors, as leadership seeks more influence to tighten up on on ambiguous lending practices, and reduce commercial debt levels. On March 14, Moody’s Investors Services stated they thought the new structure would enhance coordination between the monetary, and regulatory policies in the interests of safeguarding China’s financial stability.
Pollution in China
Another new branch is the Ministry of Ecological Environment. For those of you who have traveled to China, you’ve undoubtedly experienced days when air pollution was disturbingly heavy. The new ministry will be responsible for developing, implementing and enforcing all environmental policies. Faced with difficult challenges to reduce pollution, this is an extremely proactive and positive step. Blue skies and clean water are wonderful objectives for the country.
Are these changes intended to provide President Xi Jinping greater autonomy as he takes an even more important position on a global stage?
Yes, it is true that this revamp is the cornerstone of President Xi Jinping’s agenda to put the leadership of the ruling Communist Party squarely at the heart of policy with Xi himself at the core of the party. The party and China’s economy have become increasingly intertwined since the once-in-five years party Congress in October 2017 when Xi consolidated his leadership. This week, presidential term limits were removed from the state constitution.
A View From America
An interesting development is that fewer Americans view China as a threat than at any time in the past 30 years. Since President Trump took office in Jan. 2017, more than 53% of Americans have a favorable opinion of China according to a recent Gallup poll. The report went on to say “cooperation between President Trump and President Xi Jinping has been the main thrust in the overall US-Sino relations”. This is even more remarkable considering the position of the previous US administration, and the continuous news reporting of the “China threat” by our own US media, and the branding of Beijing as an enemy to Washington.
China and Foreign Aid
China State Councilor Wang Hong stated, “China will increase foreign aid to emerging economies around the world as means of building diplomacy. The major 2017 initiative “One Belt One Road” is beginning to deliver tangible results for China. One Belt One Road was a landmark plan to build a new “Silk Road,” connecting China to Asia, Africa, Europe and beyond. Investment into major infrastructure projects such as road, bridges, rail and ports is providing China with favorable access to the longer-term potential of the raw material, and resources of these regions. Personally, I believe this ambitious master program, and these major investments will be beneficial for the recipient country, China and the world.
Education
The Chinese government places an extremely high value on education. However, consider this, there are currently 350,000 Chinese students in the USA. Perhaps the new ministry will build a stronger, more comprehensive system to retain the students? In comparison, the US Education Secretary, Betsy DeVoe, announced that there are 14,000 US students studying in China in 2018.
In Summary
Optically, one could argue the changes of consolidation are concerning. I can respect this view. Before judging these changes, one must ask if we are evolving enough in the United States? Is our government too large? Are most branches of the US federal, and even state governments efficient? Has anyone had a favorable experience with the IRS, or your state DMV? And, our banking legislation is inconsistent.
I believe the changes in China provide a restricted, but reasonable platform, to manage transformation in their massive and growing country while maintaining influence on trading partners around the world. Furthermore, I believe it is in the best interest of policy makers from the US and Beijing to continue to work together to improve overall bilateral relationships, as we lead the world in commerce, fostering peace and stability
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