By Weng Shiyou, Yuan Zhaohui, Cheng Zhiyun
Published: 2008-03-21

By Weng Shiyou, Yuan Zhaohui, Cheng Zhiyun
Original article: [Chinese

On March 15th, the National People's Congress passed a landmark restructuring scheme for the State Council, ending speculation over potential "super ministries", and officially kick-starting China's sixth such restructuring since 1982.

According to the scheme, the National Development and Reform Commission (NDRC) will focus on macro-economic matters and move away from the micro-managing and detailed project approvals it was previously engaged in.

Analysts said this fourth rebirth of the NDRC would lead to the most powerful incarnation of it to date.

No Small Agency
The NDRC, located on Yuetan South Street in Beijing, has 26 departments and bureaus with over 1,000 staff—a size that well befits its nickname as a "super ministry". Its departments cover all major economic sectors including industry, transportation, energy, environmental protection, natural resources, social development, foreign enterprises, and trade and employment. Previously, its functions were to draft national economic programs, set up industrial and investment policies, spearhead reforms, control price levels, and participate in the makeup of fiscal and monetary policy.

According to the latest scheme, certain functions of the NDRC will be spun off to other new "super ministries", while other functions expanded.

For example, the administration of industry of the NDRC will be taken over by the newly-formed Industry and Information Ministry, another by-product of the administrative reforms. But the NDRC will retain its stake in energy policy implementation, in the form of a national energy bureau.

The national energy bureau not only has the responsibility to put forward strategies and policy concerning energy development, but also must manage the oil, gas, coal and electricity resources as well as crude oil reserves.

One expert unwilling to reveal his name told the EO that in the two months after the two sessions ended, there would be efforts to further comb over and clarify overlapping functions between ministries, down to the project or micro-level.

On March 11, in a report on the reform, secretary of the State Council Hua Jianmin specifically noted that the government would further deepen reforms of the investment system, give more approval power to local government and reduce red tape in the overall approval process.

Wei Jianing, a director of macro-economic research for the State Council, told the EO that if the micro-credit approval system could be improved, the NDRC could get reduce conflicts of interest and carry out macro policy more rationally.

A Slow Evolution
Over the past 20 years, the restructuring of the NDRC has been closely tied to China's macro-control system.

An early predecessor of it, the State Planning Commission, was established on November 1952. After reform and opening up in the late 70's, the institution was viewed as the last stronghold of the planned economy. In 1988, it and State Economy and Trade Commission were remade into a new State Planning Commission and given a macro-level mandate. In 2003, it was renamed for the seventh time, and became the National Development and Reform Commission.

But despite the emphasis on its engagement in macro-issues, some scholars said that in recent years, the NDRC had resumed its prior role as a micromanager, heavily involved in approving projects.

Meddling on the Ground
Sources said that in 2004, the State Council passed investment system reforms that stipulated that local government could approve some investment projects, but that they must also submit a report to the NDRC for filing. Accomplishing this was effectively equivalent to NDRC approval, because without a filing confirmation letter from the NDRC, projects could not be started.

On March 12, Sun Hengchao, CPPCC member and member of standing committee of the All-China Federation of Industry and Commerce, criticized the power of the NDRC at a congressional meeting. He complained that the NDRC had become a "small state council".

Some have said that the NDRC has overstepped its mandate by limiting the rise of instant noodle prices last year amidst rapid inflation in China. Before this, in 2003, the NDRC frequently used administrative measures to settle investment project issues. Those interventions aroused debate in economics circle.

According to regulation, projects valued at more than 30 million yuan must report to NDRC for examination and approval. In order to avoid such red tapes, local authorities began splitting up projects into smaller ones that fell below this threshold.

Moving Forward
On March 12, in the discussion of government reshuffle reform, NDRC became the target of criticisms. Li Jinhua, CPPCC member and general-auditor of National Audit Office, commented that it was not suitable for NDRC to lead the reform. Given the urgent priority was to reform NDRC, how was it possible to let NDRC heading the reform?

Wei also told the EO that in weighing between reform and development, the latter would likely be given priority as employment, inflation, and economic growth were all still major concerns for officials at every level of government.