China Just Announced Major Reductions To Its Bureaucracy That Will Affect Big Parts Of The Economy
The number of cabinet ministries were cut to 25, the biggest reduction in ministries since 1998, according to Societe Generale's Wei Yao.
The Ministry of Railways is being split into two parts, the administrative functions will now be merged with the Ministry of Transport, while the part that deals with construction will be changed into something like a state owned enterprise (SOE) called the China Railway Corporation (CRC). "Going forward, railway investment may no longer enjoy the same level of priority as in the past," writes Yao.
Bank of America's Ting Lu warns that this isn't necessarily a huge improvement since the CRC "would be run as a monopoly as the MoR had been".
This break up has already raised concerns about who will repay the 2.6 trillion yuan (approx. $426 billion) in debt, about 5 percent of GDP, that the Ministry of Railways amassed during its massive expansion.
Second, the government will merge the Family Planning Commission with the Ministry of Health. We have previously said that ending the one-child policy is one of Chinese government's biggest priorities. The changes to the Commission that will make it responsible for carrying out the population policy. The population strategy itself will be handled by the National Development and Reform Commission (NDRC). Some of its other functions will be merged with the Ministry of Health to form the National Health and Family Planning Commission".
"We think this move paves the way for the much-anticipated and long overdue relaxation of the one-child policy," writes Yao.
Here is a chart from Societe Generale that shows the major changes to both ministries:
Societe Generale
China has in the past year also been plagued with food safety concerns. Now, the State Food and Drugs Administration is being bumped up to a ministry, under the General Administration of Food and Drugs. "It will increase accountability by making the new super regulator exclusively responsible for food and drug safety," writes Lu.
With China and Japan's ongoing dispute over the Senkaku-Diaoyu islands China is consolidating its various maritime law enforcement agencies into the State Oceanic Administration. These include the coast guard which is part of the Public Security Ministry, the fisheries law enforcement command that is currently under the purview of Ministry of Agriculture, and the anti-smuggling police that are part of the General Administration of Customs.
While China experts are happy about the consolidation they say much more is needed. But the fact that such changes are being made this early into the start of the new leadership shows that policymakers are paying attention. These show policymakers efforts to "improve bureaucratic efficiency and weaken vested interest," writes Yao.