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The State Council， China’s cabinet， unveiled a new plan to further carry on its institutional reform and transformation of government functions during the First Session of the 12th National People’s Congress （NPC）， the country’s top legislature. The plan is the country’s seventh restructuring attempt in the past three decades. The number of ministries under the State Council will be cut to 25 from the current 27， while several departments and agencies will be reorganized.
“The most important task of the reforms is to transform and streamline government functions， with a special focus on handing down power to the market and to society and reducing government intervention on micro issues，”said State Councilor Ma Kai when deliberating the plan to the legislative body.
The reshuffle
According to the plan， the Ministry of Railways （MOR）， which has long been at the center of controversy for being both a policymaker and a service provider， will be broken up into administrative and commercial arms—namely the State Railway Administration and the China Railway Corp. The MOR has long been criticized for its bureaucracy and poor services.
The Ministry of Health （MOH） and the National Population and Family Planning Commission will be merged into a new organ combining their functions.
The status of the existing State Food and Drug Administration will be elevated to a general administration in order to improve food and drug safety， a top concern among the public.
The country’s top oceanic administration will be restructured to bring its maritime law enforcement units， currently scattered throughout different ministries and departments， under unified management.
The National Energy Administration （NEA） will be restructured to streamline the administrative and regulatory systems of the energy sector. The new NEA will incorporate the functions of the State Electricity Regulatory Commission， which will be dissolved.
Two media regulators—the General Administration of Press and Publication and the State Administration of Radio， Film and Television—will be merged into a single entity， a move meant to promote the country’s cultural institutions at home and abroad.
“In all， 18 organizations under the State Council are involved in this round of reform and will adjust their functions accordingly，”said Wang Feng， Vice Minister of the State Commission Office for Public Sector Reform. The goal
The transformation of government functions is the core of the reform， said Wang.
“In the past， when people talked about China’s institutional reform， they would only think of merging， dismantling or dissolving departments. That’s a misunderstanding，”he said. “Those are only measures and the ultimate goal is to transform government functions.”
Ma also made this point quite clear when deliberating the plan to lawmakers during the annual session of the parliament.
“The cabinet reorganization plan aims to create an efficient and law-based government with a clear division of power， reasonable distribution of labor and well-defined responsibilities，” said Ma.
Having gone through restructuring six times， the State Council has established a framework that meets the needs of market economy but still has notable shortcomings， he said. “Departments of the State Council are now focusing too much on micro issues. We should attend to our duties and not meddle in what is not our business，” Ma said.
The Central Government is troubled by the duplication of functions， overlapping management， low efficiency and bureaucracy， while supervision over administrative power is lacking， said Ma， adding that this has somewhat led to corruption and dereliction of duty. “Some departments have more power than necessary， while in some aspects of governance， they are not in a position to act，” Ma said.
While delivering his last government work report to the 12th NPC on March 5， Premier Wen Jiabao acknowledged that the transformation of government functions has not been fully carried out and some government departments are prone to corruption.
To build a well-structured， clean， efficient and service-oriented government， he said the government should continue transforming its functions and separate government administration from the management of enterprises， state assets， public institutions and social organizations.
Xue Lan， Dean of the School of Public Policy and Management at Tsinghua University， told Xinhua News Agency that the role of the government should be shifted from that of a player to a regulator.
“Currently， we stress the quality of economic growth， instead of the speed. To realize quality growth， we need enough room to release the creativity of all sectors under a proper market order，” he said. “What the government should do is to set the rules and act as a judge.” Also， there is huge potential for nongovernmental organizations to supplement the government in public services， he added. In the restructuring plan， the State Council pledged to ensure the market’s fundamental role in allocating resources and let social organizations play a greater role in managing social issues.
Chen Yulu， an NPC deputy and President of Renmin University of China， said that the reforms are moving toward a limited government.
“This round of reform， together with the previous six rounds since 1982， aims at building a limited government that is in line with socialism with Chinese characteristics. A limited government is one that should be restricted by the law and society in terms of its scale， functions， power and behavior. A limited government should be an effective one ruled by the law，” Chen told People’s Daily.
Challenges
Zhu Jiali， a professor at the Chinese Academy of Governance， said that relevant laws should be formulated in case of setbacks in China’s institutional reform.
For instance， after the institutional reform in 1982， the number of departments under the State Council was slashed from 100 to 61. However， the number rebounded to 71 in 1988， he said.
“It’s quite necessary to formulate a law in this aspect，” Zhu told The Beijing News.“Seeing from the international trend， government organizations are divided into two types： One for formulating policies and one for implementing those policies. The former type is more stable while the latter one is relatively more flexible. There should be a law to specify functions and power of the former type and how the latter type should change according to the times.”
How to relocate staff is another tough test for reform. After the 1998 institutional reform， concerned civil servants were given three options： retiring before the legal age for some older civil servants， returning to school at the government’s expense， or working in state-owned enterprises or public institutions.
“As long as there are dissolved or merged departments， there will be the problem of relocating personnel. It should be handled properly，” said Wang Yukai， a professor from the National Academy of Governance.“According to my estimation， there won’t be large-scale layoffs during this round of institutional reform because it’s mainly focused on adjusting the functions of ministries.” Chen from the Renmin University of China said that when delegating power to lower levels， there might be a vacuum of government work.
“The government should be highly cautious on the potential short-term risks. When handing down power to lower levels or reorganizing departments， there might be an intermission of work. Also， it will be unlikely for some civil servants to focus on their work during the chaos. We should take this into consideration，” he said.
Xue from the Tsinghua University pointed out that there is more to be done to better China’s administrative system.
“To establish a sound administrative system， China still has a lot of work to do，” he said.
“For instance， the government will need to build a modern civil servant management system and create a platform where different interest groups can exchange ideas and reach consensus before the government makes decisions，” he said.
Another thorny issue is avoiding financial disorder after dissolving the MOR， as its mounting debt has aroused fears of a default.
According to a financial report from the MOR， its debt-to-asset ratio climbed to 61.81 percent at the end of September 2012. Its debts amounted to 2.66 trillion yuan （$427.1 billion） against total assets of 4.3 trillion yuan（$691.9 billion） at that time.
MOR is also China’s biggest issuer of corporate notes. It sold bonds worth a total of 164 billion yuan （$26.4 billion） in 2012 to support the development of the country’s rail network.
Liu Shiyu， Vice Governor of the People’s Bank of China， pledged to keep the credit rating of the bonds issued by the MOR intact after restructuring. Liu made the remark at a press conference on the sidelines of the NPC session on March 13.
“After the restructuring， MOR’s commercial loans will be transferred to the proposed China Railway Corp.，” he said.
“Chinese banks will continue to extend financial support to railway investment and will work out more comprehensive measures to support railway construction and investment，”he said.
Zhang Jianguo， President of the China Construction Bank Corp.， said among MOR’s liabilities， nearly 2 trillion yuan （$321.8 billion） is from bank loans.
“The government must keep close watch over the debt to guarantee the stability of the financial markets after MOR’s restructuring.”
Highlights of the State Council Institutional Reform
According to the restructuring plan， the government will： Cut， reduce or simplify the review and approval of investment projects. This is in order to minimize the inconveniences and high costs involved when enterprises and individuals are trying to obtain the services they require and boost their independence to start a business or make an investment；
Separate industrial associations and chambers of commerce from administrative departments， and introduce competition through multiple associations in the same industry to boost their inde- pendence and vitality；
Integrate identical or similar institutional functions into a sole government department， such as the registries for housing， forest， grassland and land， which currently fall under different government agencies；
Break industrial monopolies and administrative hurdles that hamper the circulation of goods and services， and maintain an open and unified domestic market to ensure fairness and orderly competition；
Increase the government procurement of services and give fair treatment to social organizations in supplying medical， health， education， culture and community services.
“The most important task of the reforms is to transform and streamline government functions， with a special focus on handing down power to the market and to society and reducing government intervention on micro issues，”said State Councilor Ma Kai when deliberating the plan to the legislative body.
The reshuffle
According to the plan， the Ministry of Railways （MOR）， which has long been at the center of controversy for being both a policymaker and a service provider， will be broken up into administrative and commercial arms—namely the State Railway Administration and the China Railway Corp. The MOR has long been criticized for its bureaucracy and poor services.
The Ministry of Health （MOH） and the National Population and Family Planning Commission will be merged into a new organ combining their functions.
The status of the existing State Food and Drug Administration will be elevated to a general administration in order to improve food and drug safety， a top concern among the public.
The country’s top oceanic administration will be restructured to bring its maritime law enforcement units， currently scattered throughout different ministries and departments， under unified management.
The National Energy Administration （NEA） will be restructured to streamline the administrative and regulatory systems of the energy sector. The new NEA will incorporate the functions of the State Electricity Regulatory Commission， which will be dissolved.
Two media regulators—the General Administration of Press and Publication and the State Administration of Radio， Film and Television—will be merged into a single entity， a move meant to promote the country’s cultural institutions at home and abroad.
“In all， 18 organizations under the State Council are involved in this round of reform and will adjust their functions accordingly，”said Wang Feng， Vice Minister of the State Commission Office for Public Sector Reform. The goal
The transformation of government functions is the core of the reform， said Wang.
“In the past， when people talked about China’s institutional reform， they would only think of merging， dismantling or dissolving departments. That’s a misunderstanding，”he said. “Those are only measures and the ultimate goal is to transform government functions.”
Ma also made this point quite clear when deliberating the plan to lawmakers during the annual session of the parliament.
“The cabinet reorganization plan aims to create an efficient and law-based government with a clear division of power， reasonable distribution of labor and well-defined responsibilities，” said Ma.
Having gone through restructuring six times， the State Council has established a framework that meets the needs of market economy but still has notable shortcomings， he said. “Departments of the State Council are now focusing too much on micro issues. We should attend to our duties and not meddle in what is not our business，” Ma said.
The Central Government is troubled by the duplication of functions， overlapping management， low efficiency and bureaucracy， while supervision over administrative power is lacking， said Ma， adding that this has somewhat led to corruption and dereliction of duty. “Some departments have more power than necessary， while in some aspects of governance， they are not in a position to act，” Ma said.
While delivering his last government work report to the 12th NPC on March 5， Premier Wen Jiabao acknowledged that the transformation of government functions has not been fully carried out and some government departments are prone to corruption.
To build a well-structured， clean， efficient and service-oriented government， he said the government should continue transforming its functions and separate government administration from the management of enterprises， state assets， public institutions and social organizations.
Xue Lan， Dean of the School of Public Policy and Management at Tsinghua University， told Xinhua News Agency that the role of the government should be shifted from that of a player to a regulator.
“Currently， we stress the quality of economic growth， instead of the speed. To realize quality growth， we need enough room to release the creativity of all sectors under a proper market order，” he said. “What the government should do is to set the rules and act as a judge.” Also， there is huge potential for nongovernmental organizations to supplement the government in public services， he added. In the restructuring plan， the State Council pledged to ensure the market’s fundamental role in allocating resources and let social organizations play a greater role in managing social issues.
Chen Yulu， an NPC deputy and President of Renmin University of China， said that the reforms are moving toward a limited government.
“This round of reform， together with the previous six rounds since 1982， aims at building a limited government that is in line with socialism with Chinese characteristics. A limited government is one that should be restricted by the law and society in terms of its scale， functions， power and behavior. A limited government should be an effective one ruled by the law，” Chen told People’s Daily.
Challenges
Zhu Jiali， a professor at the Chinese Academy of Governance， said that relevant laws should be formulated in case of setbacks in China’s institutional reform.
For instance， after the institutional reform in 1982， the number of departments under the State Council was slashed from 100 to 61. However， the number rebounded to 71 in 1988， he said.
“It’s quite necessary to formulate a law in this aspect，” Zhu told The Beijing News.“Seeing from the international trend， government organizations are divided into two types： One for formulating policies and one for implementing those policies. The former type is more stable while the latter one is relatively more flexible. There should be a law to specify functions and power of the former type and how the latter type should change according to the times.”
How to relocate staff is another tough test for reform. After the 1998 institutional reform， concerned civil servants were given three options： retiring before the legal age for some older civil servants， returning to school at the government’s expense， or working in state-owned enterprises or public institutions.
“As long as there are dissolved or merged departments， there will be the problem of relocating personnel. It should be handled properly，” said Wang Yukai， a professor from the National Academy of Governance.“According to my estimation， there won’t be large-scale layoffs during this round of institutional reform because it’s mainly focused on adjusting the functions of ministries.” Chen from the Renmin University of China said that when delegating power to lower levels， there might be a vacuum of government work.
“The government should be highly cautious on the potential short-term risks. When handing down power to lower levels or reorganizing departments， there might be an intermission of work. Also， it will be unlikely for some civil servants to focus on their work during the chaos. We should take this into consideration，” he said.
Xue from the Tsinghua University pointed out that there is more to be done to better China’s administrative system.
“To establish a sound administrative system， China still has a lot of work to do，” he said.
“For instance， the government will need to build a modern civil servant management system and create a platform where different interest groups can exchange ideas and reach consensus before the government makes decisions，” he said.
Another thorny issue is avoiding financial disorder after dissolving the MOR， as its mounting debt has aroused fears of a default.
According to a financial report from the MOR， its debt-to-asset ratio climbed to 61.81 percent at the end of September 2012. Its debts amounted to 2.66 trillion yuan （$427.1 billion） against total assets of 4.3 trillion yuan（$691.9 billion） at that time.
MOR is also China’s biggest issuer of corporate notes. It sold bonds worth a total of 164 billion yuan （$26.4 billion） in 2012 to support the development of the country’s rail network.
Liu Shiyu， Vice Governor of the People’s Bank of China， pledged to keep the credit rating of the bonds issued by the MOR intact after restructuring. Liu made the remark at a press conference on the sidelines of the NPC session on March 13.
“After the restructuring， MOR’s commercial loans will be transferred to the proposed China Railway Corp.，” he said.
“Chinese banks will continue to extend financial support to railway investment and will work out more comprehensive measures to support railway construction and investment，”he said.
Zhang Jianguo， President of the China Construction Bank Corp.， said among MOR’s liabilities， nearly 2 trillion yuan （$321.8 billion） is from bank loans.
“The government must keep close watch over the debt to guarantee the stability of the financial markets after MOR’s restructuring.”
Highlights of the State Council Institutional Reform
According to the restructuring plan， the government will： Cut， reduce or simplify the review and approval of investment projects. This is in order to minimize the inconveniences and high costs involved when enterprises and individuals are trying to obtain the services they require and boost their independence to start a business or make an investment；
Separate industrial associations and chambers of commerce from administrative departments， and introduce competition through multiple associations in the same industry to boost their inde- pendence and vitality；
Integrate identical or similar institutional functions into a sole government department， such as the registries for housing， forest， grassland and land， which currently fall under different government agencies；
Break industrial monopolies and administrative hurdles that hamper the circulation of goods and services， and maintain an open and unified domestic market to ensure fairness and orderly competition；
Increase the government procurement of services and give fair treatment to social organizations in supplying medical， health， education， culture and community services.