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Fri, Mar 07, 2003 - Page 12 News List

China to restructure its government

MODERN PROBLEMS With massive structural changes taking place in its economy, especially after WTO entry, officials have decided to now take the bull by the horns


Ethnic-minority delegates arrive at the National People's Congress at the Great Hall of the People in Beijing, yesterday. China will post a record budget deficit for this year.


China, seeking greater efficiency to keep its fast-growing economy on track, unveiled an ambitious government revamp yesterday as parliament prepared to finalize the transition to a new generation of leaders.

China's third major government restructuring in a decade will create several US-style regulatory bodies, notably a banking commission, a state asset management commission and a food and drug administration. The last overhaul in 1998 was aimed at whacking the fat from a notoriously bloated and insulated bureaucracy that stifled business and frustrated even top leaders with its resistance to change.

This year's makeover aimed not only at cutting red tape, but at eliminating bureaucratic overlap that slowed reform as rival ministries battled for control of key areas such as banking, trade and the state sector.

The restructuring proposed by the State Council, or cabinet, was presented to the rubber-stamp National People's Congress on Thursday. It is due to approve the plan during its two-week annual session that started on Wednesday.

The session is also due to complete a leadership transition that began at the Communist Party Congress in November when Jiang Zemin handed over the party leadership to Hu Jintao.

Hu is due to take over as state president from Jiang and Wen Jiabao is expected to succeed Premier Zhu Rongji as economic tsar.

The revamp comes as the world's sixth-biggest economy casts about for ways to keep revving in high gear amid problems such as the lay-off of millions of workers at ailing state firms and farmers frustrated with stalling incomes.

"The reforms are necessary because the government has to react to the shifting towards a market economy," said Wang Zhimin, a parliament delegate from Shandong, a province in eastern China that has been at the forefront of the boom.

"It is also part of the modernisation process that has to follow now that we have entered the World Trade Organization," Wang said at Beijing's Great Hall of the People.

China's gross domestic product -- the broadest gauge of economic activity -- rose eight percent last year, thanks to booming exports, a flood of foreign investment and hefty state spending on projects such as highways, bridges and power grids.

Beijing is aiming for 7 percent economic growth this year.

The changes should help achieve that, analysts said.

A new banking regulator will be carved out of the central People's Bank of China to help transform state banks from debt-laden tools of central planning into modern, market-savvy financial houses.

Bank reform is also aimed at boosting lending to the private sector, which accounts for most of China's economic growth but is still starved for cash as lenders stick to government-backed state firms.

"Who is creating jobs? It's not the government, it's not the state firms, it's the private sector. But it's sad to see the private sector has very little access to credit. Money cannot get to the guy who can generate jobs," said Qu Hongbin, an economist with HSBC in Hong Kong.

A new state asset management commission will be essentially a giant holding company overseeing still-sizeable government stakes in thousands of state-run companies.

"You get an organisation which can have sole responsibility for managing the state companies, which should help to make them accountable for the success or failure of policies in that area," Qu said.

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