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China revives ruling party’s controls on financial surveillance

WorldAsiaChina revives ruling party's controls on financial surveillance
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People pose with Chinese Communist Party flags during a visit to the Museum of the Communist Party of China in Beijing, March 3, 2023, ahead of 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 commissions to oversee finance and technology, state media announced on Thursday.

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Changes Come As Chinese Pres. Xi Jinping Sees unity within the party essential for nation building. This is in contrast to the trend of Chinese leaders in previous decades to delegate more power to the government and its ministries.

A new “Central Financial Commission” “Ready to strengthen the party’s centralized and unified leadership on financial operations,” state media said in Chinese on Thursday, according to a CNBC translation. The report states that the commission is responsible for high-level planning in financial stability and growth.

The Chinese government’s annual legislative meeting this month stressed 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 responsibilities of the Financial Stability and Development Committee of the State Council – a group once overseen by the essentially retired Liu He and now disbanded.

State media said that alongside that administrative office, a “Central Financial Action Commission” would be set up to focus on ideological and party-related work in the finance industry.

While not specified by state media, a Financial Actions Commission of the same name was established following the 1998 Asian financial crisis. The commission was disbanded after about five years, leading to the establishment of the now defunct China Banking Regulator in 2003.

It is unclear how the future work of the commission will compare with history.

In the late 1990s and early 2000s, the Central Financial Affairs Commission helped to further streamline financial regulation and supervision – reducing the influence of powerful interest groups on regulators said Professor Sebastian Heilmann in a paper. He later became the founding president of the Mercator Institute for China Studies.

Heilman wrote in 2004, “But hierarchical institutions of party control were incapable of introducing market-based incentive structures to financial officials and failed to suppress financial mismanagement and corruption.” Increasing activity of foreign investors.

Tech and reorganization of the Council of States

Thursday’s announcement included previously released details on the plans reconstitution of the state council With the establishment of the Central Science and Technology Commission – the top executive body of the Chinese government.

The responsibilities of that party commission are carried out by the reorganized Ministry of Science and Technology.

The State Council’s changes established a National Financial Regulatory Administration to oversee most of the financial industry – except the securities industry. The plan also changed the designation of the China Securities Regulatory Commission within the State Council from similar to the development research center of the council to a customs agency.

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 set to take effect nationally by the end of this year.

State media said other new commissions included a group overseeing the party’s work in industry associations and affairs in Hong Kong and Macao. Beijing has tightened its control over the regions, which – under the “one country, two systems” structure – enjoy non-existent freedoms on the mainland.

Xi – China’s president and general secretary of the party – has consolidated his power and oversaw the growth of the party’s presence in the economy, which also includes non-state-owned businesses.

The new commissions are part of the party’s Central Committee, which has about 200 members. From those members comes the main leadership – the Politburo and its Standing Committee.

Membership changes are made every five years at party congresses, the most recent of which was held in October. At that Congress, Xi paved the way for his unprecedented third term as chairman and Party leadership packed with loyalists

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