China's state planning body grows more assertive as revamp looms

Reuters News

3/2/2014 4:03:58 PM - Reuters News

By Michael Martina and Benjamin Kang Lim

BEIJING (Reuters) - China will present proposals to revamp its behemoth economic planning agency at an annual session of parliament this week, sources said, but the organization's role as an antitrust regulator could eventually be enhanced.

Chinese and foreign companies, including U.S. technology firms Qualcomm Inc. and InterDigital Inc., have fallen afoul of the National Development and Reform Commission (NDRC) in recent months as its anti-monopoly arm has become more assertive.

The mammoth agency, which has several thousand employees and has sweeping powers to decide on investment, prices and other issues in the world's second-biggest economy, is striving to retain as much power as possible as it undergoes restructuring. The crackdown on price-fixing and monopolistic practices should become more pronounced as the NDRC has said it is ramping up staffing in its antitrust division.

Academics and senior officials have forecast a streamlining of the NDRC since President Xi Jinping vowed to make the economy more responsive to market forces and shift to consumer-focused investment from a state-led model.

Two sources close to senior leaders said proposals have been readied to restructure the NDRC and these will be discussed at the National People's Congress annual session beginning on Wednesday.

It was not immediately clear if any decisions would be taken.

But the NDRC's role as one of three national antitrust regulators - along with the Commerce Ministry and the State Administration for Industry and Commerce - is set in the country's five-year-old Anti-Monopoly Law that is unlikely to be cut back or revised soon.

"The NDRC is getting ready for a new role. This corresponds with the flurry of antitrust actions," said a Beijing-based foreign diplomat who asked not to be named.

Xu Kunlin, the head of the NDRC's price supervision and anti-monopoly bureau, has hinted at more unified antitrust powers, underlining speculation that the agency is seeking for primacy among the three regulators.

"Having a relatively independent, authoritative or strong and unified antitrust body is a trend. Many antitrust structures around the world are under one roof," Xu said last month.

Xu's comments could be part of the NDRC's attempt to focus on the antitrust role, and stay relevant as its broader powers are slashed, said Yee Wah Chin, a New York-based antitrust expert at law firm Ingram, Yuzek, Gainen, Carroll and Bertolotti.

"The NDRC will continue to expand its AML (anti-monopoly law) enforcement scope by the investigations it conducts, and it is entirely possible that some formal restructuring of AML enforcement will be made after several more years," Chin said.

FINES, INVESTIGATIONS

Last year, the NDRC slapped Chinese and foreign companies with investigations and fines after high-profile pricing probes. In August, the regulator fined six infant formula manufacturers, including Mead Johnson Nutrition Co, Danone and Fonterra, a record $110 million after a probe into price fixing and anti-competitive practices.

The agency confirmed last month it had opened anti-monopoly investigations into Qualcomm and InterDigital, saying it had received complaints that the companies charged discriminatory high prices in China.

Adam Dunnett, secretary general of the European Union Chamber of Commerce in China, said he expects the pricing investigations to maintain their momentum in the medium term.

"The European Chamber has encouraged its members to review their own practices and closely monitor further developments," he said, adding that the anti-monopoly law would play an important role in a more market-oriented China if evenly enforced.

At the moment, the NDRC sets policy for strategic industries, approves big investments and has the authority to influence prices for everything from liquor to gasoline. Its powers are so sweeping that it is often called the mini cabinet.

Beijing has promised to reduce its involvement in matters like the approval of new industrial projects, allowing it instead to focus on improving rules and regulations.

According to one proposal, the agency would be renamed the National Development, Reform and Planning Commission and fold in functions of other departments, including the Development Research Centre, a cabinet think-tank.

"Eventually, the NDRC will just be a think-tank. Its main functions will be to formulate (policies) and conduct research on macro (economic) planning," one source with ties to the leadership said on condition of anonymity.

"The views of various ministries and provincial governments have been solicited," a second source said.

The party announced after a conclave last November that a high-powered committee would be created to oversee the gamut of China's reforms, including coordination between ministries. President Xi heads the group which experts have said could signal changes to the NDRC's discretionary powers.

"I do expect the NDRC's wings to get clipped," said Scott Kennedy, director of the Research Centre for Chinese Politics and Business at Indiana University.

"The creation of the leading group on economic reform is already a big signal that the NDRC's powers will be cut," he said.

The NDRC did not respond to Reuters questions sent by fax.

However, a rapid transition is unlikely within such a huge bureaucracy.

"The government has been cutting red tape but we cannot see any signs of downsizing," an NDRC researcher told Reuters on condition of anonymity, noting that there would be stiff federal-level employees.

"The NDRC will still approve investment plans involving state spending. It will still be responsible for coordinating economic policies," the researcher said.

(Additional reporting by David Stanway and Kevin Yao; Editing by Raju Gopalakrishnan)