China considers overhaul to streamline government

AP News

2/26/2013 5:08:34 AM - AP News

BEIJING (AP) — The Ministry of Railways operates ultramodern bullet trains but its singular focus on rail at a time of booming car ownership and air travel makes it a relic from an era when 100 ministries ran China's planned economy.

That could soon change. China's new Communist leaders are considering another shake-up of a sprawling bureaucracy that has added market regulators and shed agencies that once dictated prices and told companies what to produce.

Modernizing the rail ministry — a Soviet-style behemoth with 2.1 million employees, its own courts and police and 1.7 billion passengers last year — by making it part of a transportation "super ministry" would be a likely priority.

Such change would be politically fraught since it threatens top jobs and influence, the lifeblood of party factions. And it could require years to complete. But reformers say it is urgently needed to keep the world's second-largest economy growing strongly.

"If the new leaders want to demonstrate they are in charge, they want to break the logjam, then this is a great time," said Dali Yang, a specialist in the Chinese government at the University of Chicago.

Though details of the streamlining have yet to be announced, General Secretary Xi Jinping and other Communist Party leaders opened a three-day meeting Tuesday to discuss a reorganization plan, state media reported. The closed-door meeting of the Central Committee will also approve the appointment of top government officials who will be publicly announced early next month at the annual session of the ceremonial legislature. That will complete a power transition begun in November when Xi was installed as party leader.

A goal of the government consolidation is to create "super ministries" that pull together a jumble of agencies with overlapping duties in broad fields such as transportation, media, energy, finance and health.

Under scenarios discussed in official media, the Ministry of Railways might be united with agencies that oversee road and air travel.

The Ministry of Culture might absorb regulators for film, publishing and TV, where boundaries have been blurred by the rise of Internet- and mobile phone-based media. The hated family planning agency, which enforces China's birth limits, might be folded into the Ministry of Health.

The potential impact on private and foreign companies is unclear, but American and European business groups regularly urge Beijing to simplify regulation and approval processes they say slow investment and hamper operations.

China has undergone repeated bouts of government restructuring to keep pace with a changing economy.

In 1982, the number of Cabinet-level ministries and commissions was slashed from 100 to 61. In the 1990s, museum pieces such as the Ministry of Machine Building that were no longer needed to set prices and tell companies what to produce were eliminated. In 1998, then-Premier Zhu Rongji shrank the number of ministries further from 40 to 29.

At the same time, Beijing created Western-style regulators for banks and securities. A Ministry of Commerce was formed in 2003 to bring together trade and planning agencies, simplifying some trade regulation to make it easier for private sector traders to function.

Such change can provoke furious opposition. In the last round of proposed reforms in 2008, the only thing leaders finally agreed on was to make the environmental regulator a full-fledged ministry in response to an avalanche of pollution scandals.

Creating fewer, bigger ministries would fit with party pledges to make the economy more productive and keep incomes growing. Xi has called for a "renewal of the Chinese nation," raising hopes a new leader whose attitude toward reform is still unclear might throw his political weight behind remaking the government.

There is, however, no indication the restructuring will affect state-owned companies that dominate most major industries including telecommunications, banking and oil and have direct ties to the top ranks of the party. That will blunt the impact of the restructuring on making markets more competitive and productive.

If leaders take action, they are likely to produce no more than one or two concrete proposals to start, and that might not be until August, said a European diplomat who follows the internal workings of China's government.

And if they fail to release firm plans before the party's plenum late this year, that will suggest they have failed to agree, said the diplomat, who asked not to be identified by name because he was not authorized to talk to reporters.

In a reflection of political resistance, the Chinese business magazine Caijing says proposals to group together "big energy," ''big culture," "big finance" and "big system reform committee" were dropped from a draft plan.

And merging rival agencies into one big ministry is no guarantee factions that run them will cooperate.

The World Bank and a Cabinet think tank warned last year growth will deteriorate if Beijing fails to act quickly to curb the dominance of state industry and nurture private companies that generate jobs and wealth. Reformers say ministries that operate their own companies, giving them incentive to suppress private competitors, must be stripped of commercial interests and turned into neutral regulators.

The Ministry of Railways is the biggest example of regulatory throwbacks reformers say must evolve for China to thrive.

In an echo of the 1960s, when ministries were powerful, self-contained empires, it still operates its own police force and courts. Other state entities shed such non-core functions years ago. Its spending is huge; last year's capital spending plan was 745 billion yuan ($115 billion) — comparable to the 670 billion yuan ($105 billion) military budget.

The ministry has built the world's biggest bullet train network but China's poor majority can't afford it and slower lines are crowded. Cargo service is expensive and inflexible, a dangerous bottleneck for a major trading economy.

The political opening for change might have come when the powerful railway minister, Liu Zhijun, was dismissed in February, 2011, amid corruption allegations. Later that year, a collision between two bullet trains that killed 40 people fueled demands for the ministry to be more responsive to public needs.

Rumors swirling around the fate of media regulators highlight potential pitfalls of consolidation.

The infant online and mobile entertainment industry flourished while regulators refrained from enforcing controls that limit the ability of traditional broadcasters to show foreign programs and other popular material. Change might simplify rules but also could bring more censorship and other controls that might hold back a promising industry.