The March 17 Ministry reshuffle attempts to design a streamlined government able to carry out Xi Jinping’s blueprint for a ‘new era’. It will reshape how government deals with the Party, the market and the world. Read this analysis, then see the full changes online (subscriber only). If you’d like a copy of the report, please contact client.services@policycn.com.

Xi Jinping emerged from the 19th Party Congress with a mandate to push China into a ‘new era’. To support this agenda, the Party has proposed a scheme to retool the machinery of government. Passed at the NPC 17 March, it is the most ambitious restructuring in decades, creating seven new ministries and adjusting the structure of nearly every national agency. It will change how government works with the Party, the market and the outside world. It could deliver streamlined governance, but risks enormous growing pains as the system copes with a disruptive change. This report explains each of the 26 changes to state structure included in the reform document: what’s changing, why and what to expect.

Liu He 刘鹤 Politburo member describes the plan as a ‘revolutionary’ reform that will touch every part of the state. Leaders have warned for years that ‘vested interests’ and inefficiency pose an existential threat to the Party-state. The roots of these problems were planted in the Mao era: ministries were created to meet production targets in ‘sectors’ 行业 of a planned economy. But the biggest worry is no longer production, and those sectors are a bad fit for contemporary policy. Former finance minister Lou Jiwei 楼继伟 joked ‘frogs in the river are governed by the Ministry of Agriculture (MoA); frogs on the shore are governed by the State Forestry Administration’. As it attempts to pivot toward meeting what Xi calls the ‘ever-growing needs of the Chinese people’, the Party needs a government fit to regulate a demand-driven economy. The new integrated system addresses the question of oversight and accountability and designs new, purpose-built agencies.


long in the works

In 2012, Xi Jinping promised change. He pledged an upgraded, functional state aligned with a vigorous market. Targeting powerful, entrenched bureaucrats, he railed against ‘foot-dragging’ and ‘vested interests’, and sought to scare them into action with a purge against corruption, indiscipline and inaction. He dealt with a few of the worst offenders, breaking up the independent and corrupt Ministry of Railroads and gutting the leadership of vast state oil companies. He streamlined central leadership and oversaw experiments to fix local government. A new system of central leading groups, the most important of which he chaired, divided up policy-making into issue areas. Pilot programs reorganised local government to create independent oversight. Entering his second term with a renewed mandate, he is now taking on the difficult, and most entrenched, ministerial middle.

Xi’s overhaul directly confronts problems that stumped his predecessors. Deng Xiaoping went around it, inviting local governments to ignore conservative central agencies and pursue profit. Wildly successful in growth terms, this approach invited corruption and intentionally undermined central control. To manage the resulting chaos, Hu Jintao and Wen Jiabao took a page from corporate governance. They set goals through the 5-year planning process, publishing binding and nonbinding targets for a range of metrics (including growth, poverty reduction, environmental protection and domestic innovation) and auditing progress. But the divided system made no one responsible for delivery. Sometimes this resulted in failures; at other times impending deadlines panicked bureaucrats into counterproductive efforts to hit their numbers.


a plan to make the system modern

The big reforms announced last week set up a suite of new agencies, most created to own specific policy objectives. A new layer of Party supervision will hold all agencies accountable to their assigned missions. The underlying theme is to replace the former structure with one that is more streamlined and results-oriented, but this reform is traumatic to the agencies and the officials who staff them, and will have unpredictable and unintended consequences.

against fragmentation—better defined roles for agencies

The main idea of this reform, says Wang Manchuan 王满传 National School of Administration, is to ‘transfer one matter to one agency’. Each one is supposed to do one thing, and do it well. They are assigned core missions (‘functions’ 功能 in CCP jargon). The new Ministry of Agriculture and Rural Affairs (MARA), for instance, is replacing the farm-oriented MoA and will own the ‘rural revitalisation’ role. It will take over scores of offices that affect rural development, swelling the former MoA budget some sixfold. This includes all rural development funding—previously spread across several agencies—and authority over a range of capital and labour issues including irrigation. This new, expanded agency will be able to make and execute development plans without the help of its peers—and will be held accountable for their success.

local oversight

The 17 March plan, and simultaneous national rollouts of pilot programs, break out many offices of local government—including revenue, environmental enforcement and the courts—from city and county budgets and place them under direct authority of central agencies, via local branches. This means mayors and county chiefs will be less able to ignore environmental and budget rules in pursuit of their interests. The new Ministry of Ecology and Environment (MEEN) will take over a national network. Local environmental protection offices, formerly subordinate to mayors and county chiefs, will receive independent funding and will be placed under the joint oversight of local governments and MEEN.

single-window services

These larger, more powerful ministries are expected to deliver results as a ‘service-oriented government’, says Zhang Jinan 张纪南 Central Institutional Organisation Commission. Single-window services, championed by Li Keqiang, will speed up. The new State Administration for Market Regulation will unite all product quality and safety regulation, reducing red tape for businesses bringing products to market. Its unfair competition arm is likely to continue a fearsome anti-monopoly campaign, but may also bring professionalism and predictability to this highly political policy area.

NDRC

The new agencies are designed to pursue and hit central targets. In this environment, two agencies will have special roles in setting and enforcing goals. National Development and Reform Commission (NDRC), most affected by this reorganisation, will step out of day-to-day management except for highly strategic, state-dominated areas of energy and the reserves system. Dozens of its offices were sliced off in the 17 March plan and given to other agencies to support their missions. It will now focus on planning, as the compiler of 5-year plans and other target-setting documents. As the author of targets in a system that increasingly demands that targets are met, it will deliver marching orders to the ministries.

holding them accountable

A powerful watchdog, the National Supervision Commission (NSC), will help ensure ministries perform their intended roles free of vested interests. Equal in power to the State Council, the NSC outranks all ministries and reports directly to the Party centre. It will take charge of a national network of supervision commissions, linked with local anti-corruption offices. Carrying on Xi’s discipline campaign, it will watch decision-makers across the public sector, holding them accountable to political directives.


what to expect

What happens when one takes a system like this apart and tries to put it back together? The answer in the near term will almost certainly be confusion. Streamlining bureaucracy does not remove interest groups, and ending implementation turf wars is all too likely to generate new boundary disputes. The post-reorganisation system may also stutter in the face of persistent aftershocks: numerous commentators have pointed out that the State Council can make sub-ministerial changes without NPC approval, and warned that it will do so as it debugs the new system.

If successful though, the plan may well deliver major upgrades to efficiency. Businesses and partner governments can better find decision-makers with the power to resolve problems. Complex and politically challenging, the reforms institutionalise the work of Xi’s first term in an attempt to redesign government, from the capital to the villages.


adjustments to agencies

ministries
ministry of natural resources MNR 自然资源部 (new)
ministry of ecology and environment MEEN 生态环境部 (new)
ministry of agriculture and rural affairs MARA 农业农村部 (new)
ministry of culture and tourism MCT 文化和旅游部 (new)
national health commission NHC 国家卫生健康委员会 (new)
ministry of veterans affairs MVA 退役军人事务部 (new)
ministry of emergency management MEM 应急管理部 (new)
ministry of science and technology MoST 科学技术部 (new powers)
ministry of justice MoJ 司法部 (new powers)
ministry of water resources MWR 优化水利部职责 (adjusted)
national audit office NAO 审计署职责 (new powers)
national supervision commission NSC 国家监察委员会 (new)

other agencies
state administration for market regulation SAMR 国家市场监督管理总局 (new)
state administration of radio and television SART 国家广播电视总局 (new)
china banking and insurance regulatory commission CBIRC 中国银行保险监督管理委员会 (new)
state international development cooperation agency SIDCA 国家国际发展合作署 (new)
national medical insurance administration NMIA 国家医疗保障局 (new)
state grain and material reserves administration SGRA 国家粮食和物资储备局 (new)
state immigration administration SIA 国家移民管理局 (new)
state forestry and grasslands administration SFGA 国家林业和草原局 (new)
state intellectual property office SIPO 国家知识产权局 (moved)
national council for social security fund NCSSF 全国社会保障基金理事会 (moved)
state administration of taxation SAT 国家税务总局 (new powers)

revised 10 April 2018