China is merging its banking and insurance regulators, giving new powers to policymaking bodies such as the central bank and creating new ministries in the biggest government shake-up in years.
The revamp is a cornerstone of President Xi Jinping’s agenda to put the leadership of the ruling Communist Party squarely at the heart of policy with Xi himself at the core of the party.
The economy and the party have become ever more intertwined since a party congress in October when Xi consolidated his grip on power, with party control deemed necessary to help push through reforms. On Sunday, presidential term limits were removed from the state Constitution.
“Deepening the reform of the party and State institutions is an inevitable requirement for strengthening the long-term governance of the party,” Liu He, Xi’s top economic adviser and confidante, wrote in a commentary in the official People’s Daily.
“Strengthening the party’s overall leadership is the core issue,” he said.
The commentary suggested the party will have greater influence and say in the government, or the State Council, which is headed by Premier Li Keqiang, some analysts say.
The long-awaited move to tighten oversight of China’s $42 trillion banking and insurance sectors comes as authorities seek more clout to crack down on riskier lending practices and reduce high corporate debt levels.
“The biggest news is still about the merger of the regulators.
“The central bank will be in charge of the macro supervision side, while the merged regulators will be responsible for the more concrete part of things,” said Zhou Hao, senior emerging markets economist at Commerzbank.
China will also form a national markets supervision management bureau, according to a Parliament document released yesterday. The bureau will take on the pricing supervision and anti-monopoly law enforcement role from the state economic planner the National Development and Reform Commission (NDRC), Ministry of Commerce and State Council.
The heads of the new merged regulator, ministries and departments will be announced before the close of the annual session of Parliament on March 20.
Many Xi allies are expected to get top appointments including the chair of the National People’s Congress, or Parliament, and National Supervisory Commission.
China is among the global economies seen as most vulnerable to a banking crisis, the Bank for International Settlements said at the weekend.