Unpacking The Institutional Reforms Of China’s State Council – Analysis

By He Jun

On February 28, Chinese President Xi Jinping expressed that the focus of the Chinese Communist Party and state institutional reform will be on key industries and areas, aiming to address some difficult problems that are of major importance and social concern, and will have an impact on the economic and social development of the country.

On March 7, the Xinhua News Agency revealed more details about China’s institutional reform this year. From the latest State Council institutional reform plan, although the reform is not as intensive as it was in 2018, there are still many substantial adjustments involving the functional separation, restructuring, and attribution issues of several departments. Regarding the non-financial sectors of the State Council institutional reform, the important reform plans are as follows:

The Ministry of Science and Technology will undergo significant restructuring, with some functions being separated. The retained functions will include strengthening the ministry’s ability to promote the development of a new national system, improving the management of the entire scientific and technological innovation process, and facilitating the integration of science, technology, and economic and social development. Additionally, the ministry will have macro-management responsibilities, including strategic planning, system reform, resource allocation, coordination, policy and regulation, and supervision and inspection. The responsibilities that will remain within the ministry include national basic and applied research, national laboratory construction, national science and technology projects, national technology transfer system development, technology transfer and transformation, industry-academia-research integration, regional innovation system development, scientific supervision and evaluation system development, scientific research integrity development, international scientific and technological cooperation, science and technology talent development, national scientific and technological awards, and other related duties, which will continue to be part of the State Council’s departmental structure.

The reform plan will transfer certain responsibilities away from the Ministry of Science and Technology to other departments. The ministry’s duties related to agricultural and rural development, rural scientific and technological progress, and technology service industries will be transferred to the Ministry of Agriculture and Rural Affairs, while plans for promoting social development through science and technology will be divided among the National Development and Reform Commission (NDRC), the Ministry of Ecology and Environment, and the National Health Commission (NHC). The Ministry of Industry and Information Technology will take over the Ministry of Science and Technology’s responsibilities for developing plans related to high-tech industrialization, technology market, and technology intermediaries, as well as guiding the construction of national independent innovation demonstration zones. The Ministry of Science and Technology’s power in allocating and using financial science and technology funds will be weakened. Furthermore, the China Rural Technology Development Center and the China Biotechnology Development Center will be transferred to the Ministry of Agriculture and Rural Affairs and the NHC, respectively.

According to Xiao Jie, State Councilor and Secretary-General, the institutional reform plan will strengthen the Party Central Committee’s centralized and unified leadership over scientific and technological work, and establish the Central Science and Technology Commission, whose responsibilities will be taken on by the reorganized Ministry of Science and Technology.

Researchers at ANBOUND believe the institutional reform that significantly reduced the Ministry of Science and Technology’s responsibilities to be somewhat surprising given the state’s emphasis on technological innovation. The reform is characterized by several aspects: Firstly, the functions of the Ministry of Science and Technology have now been narrowed down to promoting work in the fields of science and technology policy, technology achievement transformation, basic research, and applied basic research. Secondly, all work that intersects with other departments, such as technological support for agriculture, high-tech industries, and social development, will be removed. Thirdly, the Ministry of Industry and Information Technology will take over the management of independent innovation demonstration zones and high-tech zones, which is the most significant change for the Ministry of Science and Technology. This move implies that industry departments will solely lead the development of national high-tech zones as carriers of high-tech industries, and is itself a major shock. Fourthly, the ministry’s power to manage financial science and technology funds will be greatly reduced. Instead, other departments will have the power to allocate the funds. Finally, the pattern of a Ministry of Science and Technology with lesser functions and with larger technological demand will emerge. The new pattern’s ability to support the diffusion of technological factors into industries and other fields remains to be seen.

Next, there is the proposal for the establishment of a national bureau to manage data. Such an entity will focus on integrating, sharing, and developing data resources, as well as planning and constructing digital initiatives across the country. The NDRC will be managing the bureau and it will take on a range of responsibilities of the Office of the Central Cyberspace Affairs Commission, including formulating plans for digital development, coordinating public services and social governance informatization, promoting smart city construction, and managing national information resources. In addition, the responsibilities to coordinate the promotion of digital economic development, organize and implement national big data strategies, promote the construction of data infrastructure, and promote the layout of digital infrastructure, among others, will be transferred to the national data bureau.

In the era of the digital economy, it is not surprising to establish a specialized bureau. However, it is worth noting that as it will fall under the management of the NDRC, it means that the NDRC’s relevant powers and financial rights will be greatly strengthened.

On the other hand, the Ministry of Agriculture and Rural Affairs will take over the responsibility for rural revitalization, while the Ministry of Civil Affairs will handle elderly care, while the Ministry of Civil Affairs will manage the organizing and coordinating of policies and measures that respond to population aging. It will also undertake the specific work of the National Committee on Aging. The office of the National Committee on Aging will be relocated to the Ministry of Civil Affairs.

In addition, the China National Intellectual Property Administration and the National Public Complaints and Proposals Administration were adjusted to be directly under the State Council.

Finally, the number of personnel in the country’s central state organs will be reduced by 5%. All departments across these organs will be affected, and the recovered staffing will be redirected toward bolstering key areas and critical tasks. At this time, it is unclear which areas will be deemed “key” or what work will be considered “critical”.

There have been significant changes in the financial sector’s institutional structure, including setting up a new financial regulator that will replace the China Banking and Insurance Regulatory Commission (CBIRC). A local financial supervision system too will be established where the local agencies will be under the central financial management department. The China Securities Regulatory Commission (CSRC) will also be restructured to become a direct institution under the State Council. For the regional branches and branch business management departments of the People’s Bank of China (PBoC), the country’s central bank, the business management department will be directly under the head office, and the central sub-branches in provincial capitals will be abolished in the central bank system. Provincial-level branches are set to be established in 31 provinces (including autonomous regions and municipalities directly under the central government). There will also be branches established in cities specifically designated in the state plan, including Shenzhen, Dalian, Ningbo, Qingdao, and Xiamen. Market operation institutions managed by the central financial management department will be separated, and relevant state-owned financial assets will be transferred to state-owned financial capital-entrusted management institutions. The staff of the People’s Bank of China (PBoC), the national financial regulator, the CSRC, and the State Administration of Foreign Exchange (SAFE) with its branches and dispatched offices will be included in the unified and standardized management and will receive salary and treatment standards of national civil servants.

Final analysis conclusion:

The institutional reform of China’s State Council is a prominent development, as it has led to the division of powers and responsibilities within the Ministry of Science and Technology, while the National Development and Reform Commission and the Ministry of Industry and Information Technology have seen a significant strengthening of their powers, responsibilities, and resource allocation capabilities. The financial sector’s regulatory system and institutions have also been bolstered by the reform. While the reform plan for the Chinese central government and other institutions has yet to be announced, it is expected that further major changes will be made.

He Jun is a researcher at ANBOUND