Caixin
Mar 20, 2018 02:53 PM
OPINION

Editorial: Reshuffle Seeks to Modernize State Governance

The latest government reshuffle has been announced, as the National People’s Congress approved the reform plan on March 13. A few ministries and commissions have been merged or transformed into new agencies. Compared with previous seven government overhauls, the latest move is not short of surprises and new features. After all, institutional reform should follow a basic rule: to modernize state governance, the market should play a decisive role in the allocation of resources, while the government plays a better role.

The economic base determines the superstructure. China has been working on the reform and opening-up for 40 years. The “socialist market economy” was established as a goal of economic restructuring 26 years ago. At present, the Chinese economy is seeking new drivers, as it transitions from high-speed growth to high-quality development.

The key goal of the latest government reshuffle is to better serve the purpose of economic modernization. The third plenum of the 19th Communist Party Central Committee in February vowed to clear the obstacles and problems existing in the party and state organs.

It’s been a while for people in business circles or in their daily life to feel the problems of government agencies being bloated and irresponsible because of the lack of clear-cut responsibilities. Over the past five years, the central government has been working hard to streamline government functions and deregulate the industries, with remarkable results. But the changes are limited, due to the existing institutional structure. Only by “demolishing the temples and the moving the monks around,” as proposed by former Chinese leader Deng Xiaoping in the 1980s, can the market play a decisive role in allocating resources. The authorities should also ensure the market’s major role, so that the government agencies don’t have to repeat the endless cycle of split and merge and split.

The government reshuffle is an important part of China’s recent campaign to deepen the reform on all fronts. It is also a rare opportunity to further transform government functions. The reform has solved many long-standing problems. Some changes are so dramatic, even exceeding public expectations. Antitrust enforcement, for example, used to be performed separately by the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce. Now the task has been put under one agency, the new State Market Regulatory Administration.

The establishing of the State International Development Cooperation Agency and the State Immigration Administration is a move to further open up China to the outside world and bring it closer to the rest of the world.

Of course, the formulation of a good plan is only the beginning of reform. The effect will be tested by time. Based on the concept of unified supervision, the establishment of the State Market Regulatory Administration is a necessary stride regarding the construction of a unified, open, competitive and orderly market. Market regulation has long been “toothless” and fragmented. We need to wait and see whether the latest restructuring can cure the stubborn disease.

Reform is always on the road, and institutional reform is certainly a dynamic process. More than six months have passed since the country’s key conference on financial work in 2017, and there have been many discussions on the reform of the financial regulatory system. The formation of the China Banking and Insurance Regulatory Commission and the strengthening of the Central Bank’s responsibilities is a step in the right direction. However, it remains to be seen as to whether it can address such issues such as the overlapping regulatory roles or vacuums of oversight.

Three relationships should be addressed to upgrade the national governance system and modernize its capacity to govern.

First, the coordination of people and things must be firm and reasonable. Institutional reform will touch on the interests of both people and industries, and it is bound to face tangible or intangible resistance. The authorities should be well prepared and properly handle problems to ensure a smooth transition of old and new institutions. In past government shakeups, the officials involved were often fretful and preoccupied with their own futures. In institutional adjustment, efforts should be made to make sure people can achieve their full potential. At the same time, strict disciplines should be imposed on officials to make sure they don’t break the rules.

Secondly, the coordination of the reform of the party, government and armed forces needs to focus on priorities and be carefully planned. The party’s Central Committee in February adopted documents to outline the reform of the party, government and armed forces. The institutional reform of the State Council is one of the tasks. The reform of government institutions and other institutions are a systemic engineering project, which needs careful coordination. Extra attention should also be given to preventing some government agencies from “opening a backdoor” to divert redundant personnel. Such phenomenon should be resolutely eliminated. The central government has set a red line forbidding agencies from setting up extra institutions to perform administrative functions.

Third, co-ordination between the central and local authorities should be standardized and effective, in particular by avoiding the creation of the same structure in central and local institutions. According to the reform plan, after agency changes at the central and provincial levels, the local governments will follow. In the past, the boundary between the central and local authorities was too vague. There was also a lack of stability in the delineation of powers and responsibilities among the levels of government. This could easily lead to the random creation of excess government agencies and positions. Liu He, a senior official of the Communist Party, wrote recently that the local governments can set up agencies in accordance to local needs, and each agency does not have to match one-to-one with upper-level or lower-level agencies. A list of powers of all levels of government needs to be drawn up, he wrote.

Building a service-oriented government that satisfies the people is not only the starting point of the institutional reform, but also a target to pursue. To realize the modernization of the governance system and governance capacity, China needs to make full use of all the achievements of human civilization. The public is eagerly looking forward to the desired results from the latest government overhaul.

Translated by Wu Gang (gangwu@caixin.com)

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