In China, Local Leaders Defy Beijing on Reforms - Investing Guide at Deep Blue Group Publications LLC Tokyo
China’s top leaders continue
to struggle to get local and provincial governments to implement economic
reforms. China’s government appears to be struggling to get local governments
to implement its economic reform policies.
Following a meeting of the
State Council, China’s cabinet, on Friday, Xinhua News Agency reported over the
weekend that the State Council will dispatch eight inspection teams to visit
local governments nationwide to investigate whether economic reforms are being
properly implemented.
“Responsibility for poor
implementation of policy measures will be investigated, accountability will be
serious, and there will be verbal admonishments, criticism or even
administrative sanctions according to laws and regulations,” the State Council
said, according to Reuters.
The inspection teams will
travel to various localities from June 25 to July 5. They have been asked to
review implementation of 19 different policies the State Council has announced
since July of last year. The State Council has ordered local governments to
conduct their own internal reviews of implementation before the inspection
teams begin arriving later this month.
According to Reuters, at the
top of the State Council’s list is streamlining the administrative approval
process to reduce the amount of red tape, an issue that Premier Li Keqiang has
been particularly forceful in promoting.
The report said the list also includes ecological and environmental
improvements, “construction of major water projects, investment
policies for non-state companies, employment of college graduates,
construction of affordable housing, and efforts to ensure that the financial
services industry supports the real economy.”
The State Council’s
announcement came after its own meeting on Friday as well as the third meeting
of the new Leading Group for Overall Reform. At the latter meeting, the Leading
Group announced “a framework for pilot programs of judicial reform, a work
program on judicial reform in Shanghai, and a plan to set up special courts on
intellectual property rights (IPR).” Judicial reforms in part are aimed at
weakening the grip of power of local leaders.
The Leading Group also debated
plans for reforming the fiscal and household registration systems, both of which
will be particularly important for local governments in China. At the meeting,
President Xi Jinping — who presides over the Leading Group for Overall Reform —
said, according to China Daily, that the main objectives of the fiscal reforms
are “ensuring a clear division of power [between levels of government], reform
of the tax system and stabilizing the tax burden, transparent budgeting, and
improved efficiency.” Xi was also summarized as saying that he expects “a
fiscal system to serve the initiatives of both central and local governments
while clarifying the responsibilities of the two.”
On China’s household reforms,
Xi was quoted as saying, “Accelerating reform of the household registration
system is an important part of urbanization and involves hundreds of millions
of rural migrants.”
He also stressed that
implementation would be the key to success in all areas of reform. “The success
of our blue print [for reform] will be its implementation,” Xi said. He also
said that leading departments should be assigned for every area of reform.
“Every single issue should have specific personnel to manage, supervise, urge
and implement.”
Primer Li, who is a deputy of
the Leading Group on Overall Reform and heads the State Council, also
emphasized the importance of reform during an economic conference last week.
“To achieve the development goals for 2014, we should better mobilize efforts
from both the central and local authorities” to implement reform, Li said,
according to local media. At the State Council meeting, Li also reportedly
said, “My only concern is that our existing policies are really implemented.”
China’s top leaders are
seeking to rebalance the economy from the current model which relies heavily on
state-led investment to one more dependent on domestic consumption. This has
slowed growth considerably, especially in certain provinces in western and
central China that are heavily dependent on government investment
and certain kinds of manufacturing.
As The Diplomat expected,
local officials — who benefit disproportionally from the current model — appear
to be the largest barrier to implementing the necessary reforms. The South
China Morning Post reports that at a State Council meeting on May 30, Li
“pounded the table as he blasted local officials for inertia in carrying out
central government directives.” The new inspection teams for implementation are
the latest way the central government has tried to force local governments to
get in line.
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