Briefing Series – Issue 38

CHINA’S NATIONAL PEOPLE’S CONGRESS 2008: NEW ADMINISTRATION, PERSONNEL RESHUFFLING AND POLICY IMPACTS

Yongnian ZHENG

Zhengxu WANG

March 2008

China House University of Nottingham University Park Nottingham NG7 2RD United Kingdom Tel: +44 (0)115 846 7769 Fax: +44 (0)115 846 7900 Email: [email protected] Website: www.chinapolicyinstitute.org

The China Policy Institute, part of the School of Contemporary Chinese Studies at The University of Nottingham, was set up to analyse critical policy challenges faced by China in its rapid development. Its goals are to help expand the knowledge and understanding of contemporary China in Britain, Europe and worldwide, to help build a more informed dialogue between China and the UK and Europe, and to contribute to government and business strategies.

1 Summary

The annual two­week­long session of China’s National People’s Congress (NPC), lasting from 3 March to 18 March 2008, witnessed the approval of a major personnel reshuffle and changes in the State Council. The new administration will take charge of the country’s social and economic affairs over the next five years.

Hu Jintao was re­elected as State President, and Wen Jiabao as Premier. The most significant event was the election of Xi Jinping as Vice President and Li Keqiang as Executive Vice Premier. The appointments strengthened Xi’s position as Hu’s successor 2012 and Li’s status as Wen’s successor in 2013.

Lagging prior high expectations, the State Council did not undergo an overhaul. However, the NPC approved a plan to create five new ministries: the Ministry of Industry and Information, the Ministry of Transport, the Ministry of Human Resources and Social Security, Ministry of Environmental Protection, and the Ministry of Housing and Urban­Rural Construction. The state also reorganised parts of the National Development and Reform Commission and the Ministry of Health. All these changes reduced the total number of ministerial agencies from 28 to 27.

The reorganisation of these few ministries did little to advance the government’s shift toward a service­oriented body that is limited in scope but able to provide effective regulation. The main macro­economic policymaking agencies, i.e. the National Development and Reform Commission, the People’s Bank of China, and the banking and insurance industries regulators, remained largely unchanged. The elevation of the State Environmental Protection Agency to a ministry amounted to a mere name change. The State Food and Drug Administration came under the governance of the Ministry of Health, as it was downgraded from an independent unit that reported directly to the Premier. The issue of industrial safety regulation was not addressed.

The inability of the leadership to make necessary changes to the government structure is due to the very nature of the Chinese state. The government’s direct involvement in economic activities has increased, in spite of the country’s growing market economy and expanding private sector. With respect to non­profitable public services that are in urgent demand such as public transportation, educational services and health care, the government has however been inclined to take the path of “privatisation” so as to pass the costs of running those services to private firms, which are ultimately passed on to consumers.

Even though there was no major structural overhaul, the NPC did approve a major cabinet reshuffle. Most notable were the appointments of the four vice premiers: Li Keqiang, Hui Liangyu, Zhang Dejiang, and Wang Qishan. The changes, reflecting a balance between factional politics and professionalism, included the appointments of people from different factional backgrounds, namely, the Chinese Communist Youth League, the so­called “Princelings” and those who were closely associated with former leader Jiang Zemin. All the new appointments had been made based on the professional experiences of the appointees, who had not been undermined by factional politics.

The personnel reshuffle helped consolidate Wen Jiabao’s power. With the appointment of Wang Qishan as vice premier in charge of the financial sector, Wen can rely on Wang’s professional as well as administrative experience in dealing with the most challenging aspects of running the economy.

Li Keqiang, the No. 2 in the State Council, would have to act as the Premier­in­ waiting. Being the second­highest­ranked, Li faces a dilemma in that he has to demonstrate his capability, which would require him to take initiatives in various

2 areas including the implementation of further governmental reforms and policies without offending his colleagues. Support from the other bureaucrats is needed when the “election” takes place in five years. However, any major reforms are likely to affect his colleagues.

Meanwhile, the new administration is facing its toughest challenge this year in the form of the 2008 Olympic Games and its attendant economic and social issues. Unrest in Tibet this month has already created one of the biggest headaches for the administration so far this year. Controlling and sustaining economic growth in the aftermath of the Olympic Games are also not easy tasks. Expanding local power coupled with the continuous weakening of central power, as well as globalisation all point to the urgent need for a new government structure in China. Yet such a structure has not materialised.

3 China’s National People’s Congress 2008: New administration, personnel reshuffling and policy impacts

Yongnian Zheng and Zhengxu Wang*

The 2008 National People’s Congress: what did and did not happen

1.1 China’s National People’s Congress (NPC), the country’s top legislator, met from 3 March to 18 March 2008. This year’s session marked the convening of the newly­ elected Congress, the eleventh since the founding of the People’s Republic of China in 1949, as the five­year­term of its predecessor came to an end. A total of 2,987 delegates, selected from across the country following indirect elections, gathered in Beijing to exercise their allegedly “supreme” law­making power.

1.2 China’s political power ultimately lies with the Chinese Communist Party (CCP), which rules China through the Political Bureau and its Central Committee, and the gigantic party machine that controls the government at every level. The NPC, while in theory wielding national sovereignty, merely serves to legitimise the rule of the CCP by turning its ideas into state laws and policies.

1.3 Much was expected from the NPC annual session this year. A new administration was to be formed, following the mid­term leadership adjustments made during the CCP Congress in October 2007. Premier Wen Jiabao, having reaffirmed his No. 3 position within the CCP at the Party Congress, was to remain in office for another five­year term though several vice premiers and state councillors, as well as a number of ministers were expected to be replaced. Some of these officials were appointed five years ago when Jiang Zemin was still President. Hence there were expectations they would be replaced by officials who were closer linked to the current leaders. Others meanwhile have reached the age of retirement.

1.4 A series of new policies were expected to be deliberated and formulated, in line with a recent shift in the concept of “scientific development”. As the brainchild of the current Hu Jintao­Wen Jiabao leadership, “scientific development” refers to an attempt to move China away from its blind and ruthless pursuit of GDP growth to a path that is more balanced and directed at a more sustainable form of development. 1 To ensure that this shift in development thinking translates into real changes, the new government needs to introduce new policy guidelines and incentives to encourage changes in thinking and behaviour among provincial and local government bodies.

1.5 More importantly, there had been high expectations for a major overhaul of the government structure, as part of the Party’s effort to streamline the government in order to tackle challenges that have arisen in recent years. The catchword was dabuzhi, which essentially mean the reorganisation of existing institutions into so­ called “super­ministries” that have strong regulatory power.

1.6 The concept of “super­ministries” was officially introduced at the 17 th Party Congress last October as a government reform guideline. Discussions among policy and academic circles emerged soon after the Party Congress, suggesting the

* Yongnian Zheng is Professor of Chinese Politics and Head of Research at the China Policy Institute, School of Contemporary Chinese Studies, University of Nottingham. Dr. Zhengxu Wang is Senior Research Fellow at the institute. 1 See Zhengxu Wang and Yongnian Zheng, “Key Policy Outcomes of the 17th National Congress of the Chinese Communist Party”, China Briefing Series ­ Issue 31, China Policy Institute, University of Nottingham, November, 2007.

4 leadership was contemplating plans to revamp the government. Subsequently on 25 February, the Plenum of the CCP Central Committee passed two decisions on government restructuring, leading many people to anticipate the unveiling of final details of this plan at the NPC.

1.7 Government reform and the formation of “super­ministries” thus became the focus points of this year’s NPC. However, the changes that were finally announced turned out to be much smaller than expected.

1.8 Chinese scholars had suggested the creation of several “super­ministries” that might increase the regulatory prowess of the central government. Among those proposed were one ministry responsible for financial regulation, one for environmental protection, one for land resource regulation, as well as one for transportation regulation. What eventually emerged fell far short of such expectations. No effort had been made to reorganise the various agencies in charge of financial regulation, while only minor adjustments were carried out in other instances such as the elevation of the State Environmental Protection Agency to a Ministry of Environmental Protection.

1.9 Many existing factors had led to the leadership’s inability to carry out a major overhaul of the government structure, the most significant one being the failure of the Chinese state to separate political power from direct control of economic resources. Due to the intimate relationships between the government and economic interests, state agencies have become “entrenched interests” that defy reform attempts.

1.10 In recent years, the state has become the largest owner of the nation’s wealth. According to an estimate by Professor Zhou Tianyong at the Central Party School, the national government and various local governments spend RMB 9 trillion per year, compared to the nation’s GDP of RMB 20 trillion per year,2 In other words, almost half of the national wealth is controlled by the government and spent through the various government bodies. On the other hand, many profitable industries, such as automobiles, chemicals, steel, energy, and petroleum, are directly controlled by the government. It has become virtually impossible to divorce government bodies from economic interests and convert them into solely service providers and regulatory bodies.

1.11 Though a structural overhaul did not take place, major personnel changes were approved by the NPC. Hu Jintao was re­elected as State President, and Wen Jiabao as Premier. The most important significant event was the election of Xi Jinping as Vice State President, which consolidated Xi’s position as Hu’s successor in 2012. This appointment, which put Xi under public scrutiny, is in line with the Party’s plan to groom the core of the future leadership. Recently added to Xi’s portfolio was overall responsibility for the 2008 Olympic Games.

1.12 With respect to the State Council, Li Keqiang became Executive Vice Premier, which implied that Li would succeed Wen as Premier in 2013. Zhang Dejiang, a close associate of China’s former leader Jiang Zemin, took over the responsibilities of Wu Yi. Wang Qishan, a close associate of former premier Zhu Rongji, became in charge of the financial sector. These appointments, reflecting a balance between factional politics and professionalism, point to potential significant changes in different government sectors and will have a major impact on the way the government manages the economy.

2 Apple Daily, 12 March 2008.. The report is available at http://www.popyard.com/cgi­ mod/newspage.cgi?num=175873&r=0&v=0, accessed on 21 March 2008.

5 Building an effective, limited, service­oriented government: Reform background

2.1 While China’s one­party political form has remained the same for several decades, its governing machinery has undergone several rounds of restructuring since the early 1980s. Those changes had been necessitated by the shift of China from planned to market economy, as well as the changing nature of governance in light of economic development, internationalization, and social changes. 3 The State Council ­­ China’s cabinet ­­ has by some account undergone five rounds of significant restructuring in the years of 1982, 1988, 1993, 1998, and 2003.

2.2 The most radical reform was carried out by then premier Zhu Rongji in 1998, resulting in the closing of several ministries which were responsible for industrial planning under the old economic system, such as the Ministry of Coal Industry, Ministry of Chemical Industry, Ministry of Machinery, and Ministry of Electricity. The total number of ministries was reduced to 29 from 40.

2.3 In 2003, when the new administration took over, Wen Jiabao, who succeeded Zhu Rongji, initiated a minor wave of adjustments. The State­owned Assets Supervision and Administration Commission was created to manage large state­own enterprises (SOEs). Existing financial regulatory bodies were also reorganized into the People’s Bank of China, the China Banking Regulatory Commission, and the China Insurance Regulatory Commission. The Ministry of Commerce was formed in view of China’s increasing ties with the world economy.

2.4 In other words, the government has been actively responding to changing social and economic realities in line with the objectives of marketisation, separation of government from economic activities, and facilitation of China’s integration with the global economy. Meanwhile, social developments within China also led to the creation of the Ministry of Labor and Social Security in 1998.

2.5 China’s economy has expanded at an annual pace of more than 10 percent since 2003. With ever­expanding exports, the country has become an increasingly significant player in the world economy. Yet in terms of governance and regulation, the central government has become less and less effective. Over the last few years, it has become increasingly apparent that the central government is gradually losing overall control of the economy as the economy continues to overheat.

2.6 The central government’s ability to coordinate economic activities across the country is also fast declining. While leaders in Beijing have repeatedly emphasized the need to shift to a more balanced and sustainable form of development, provincial chiefs have persisted in their old ways. Local governments and firms have frequently been found to collude to maximize their gains at the expense of society and the environment.

2.7 For example, left with hardly any institutional measures to achieve its policy goals, the central government has had to fall back on political measures by clamping down on individual defiant local officials or firms to cool the speculative frenzy in the real estate market. In 2004, the central government, with the support of Li Yuanchao, terminated a local steel production project ­­ the Tienben Company of Changzhou City, Jiangsu Province ­­ because the firm had violated strict state fiscal and monetary policies and acquired land illicitly. Li was then party secretary of Jiangsu and a close associate of President Hu Jintao.

3 Yongnian Zheng, Globalization and State Transformation in China (Cambridge, UK: Cambridge University Press, 2004), Chapter 5.

6 2.8 The fall of Shanghai Party Secretary Chen Liangyu in 2006 could also be seen as a sign of institutional weaknesses on the part of the central government. Chen had been disregarding national macroeconomic policy goals by shielding or even encouraging real estate developers in Shanghai at a time when the central government was trying to cut liquidity and cool soaring real estate prices across the country. In order to remove Chen from his office and thereby remove the shield of Shanghai business tycoons, the Hu­Wen government had to gather corruption charges against Chen. The support of Jiang Zemin, who had supported Chen in the past, allowed the state to bring charges against Chen and dismiss him from office.

2.9 Meanwhile, many other instances of the government’s failure to achieve policy or regulatory goals can be found. These included unsuccessful attempts to improve industrial safety, reflected in the ever­increasing frequency and fatality rate of coal mine accidents, chemical plant explosions, environmental disasters, as well as food safety and product safety scandals, which have been making international headlines.

2.10 The urgency of strengthening governance in order to achieve macroeconomic goals and regulatory outcomes motivated the formation of “super­ministries” under the State Council. The creation of “super­ministries” involved transferring some local powers back to the central government, expanding the authority of some government departments, and re­organising chains of command among government agencies. These changes were required to rationalize, clarify and empower the governing structure.

2.11 However, the broader need is for China to transform from a developmental state to one that is limited in scope and service­oriented. The government should reduce its direct involvement in economic activities and focus on regulation and providing public services, a need that party leaders have acknowledged. Over the years, the leadership has been stressing “small government, big society” (xiaozhengfu dashehui) as the goal of government reform. Stated in the report of the 17 th Party Congress in October 2007, the aim was to separate government from firms, capital, non­for­profit organizations, as well as intermediate market organizations.

2.12 Following 30 years of rapid economic development, it is high time that the Chinese government transforms into a provider of public services and an effective regulator and distances itself from the management of businesses. However, the possibility of such a transformation taking place is highly doubtful given the minor government changes passed by the NPC this year.

New government structure

3.1 Given the apparent weaknesses and ineffectiveness of the central government, speculations had been rife about the creation of “super­ministries” particularly in the areas of financial regulation, environmental protection, industrial policies, land resource management, energy, and food safety. For instance, there was a report claiming that a super financial regulation body would be created to oversee the banking, insurance, securities, and insurance industries. 4 Li Keqiang, the selected Executive Vice Premier, was said to be leading this restructuring project. Li had also supposedly proposed reorganizing State Council agencies into four functional groups: administrative affairs, economic affairs, social affairs, and supervision. 5

3.2 On 11 March 2008, about one week after the convening of the NPC, the government restructuring plan was reviewed and approved at a plenary session. Announced by Hua Jianmin, Secretary General of the State Council, the plan involved the creation

4 Min Pao, Hong Kong, 9 February 2008. 5 Duowei Yuekan [duowei monthly], March issue 2008

7 or reorganization of five ministries: the Ministry of Industry and Information, the Ministry of Transport, the Ministry of Human Resources and Social Security, the Ministry of Environmental Protection, and the Ministry of Housing and Urban­Rural Construction. Other adjustments were made to the National Development and Reform Commission and the Ministry of Health (See Chart 1). All these changes reduced the total number of ministerial agencies from 28 to 27.

3.3 Specifically, the National Defences Science and Technology Commission, the Ministry of Information Industry, and the State Council Office of Information were merged to form the new Ministry of Industry and Information (MII). This new ministry was given the mandate to plan and execute industrial development and policies. It will direct the upgrade of technologies among the nation’s industries, encourage innovation and promote electronic, communication, and computational technologies. The State Bureau of Tobacco Sales, while strictly­speaking, was neither an industrial regulatory body nor related to information technology, came under the jurisdiction of the MII. It previously reported directly to the Premier.

3.4 The Ministry of Communications and the State Administration of Civil Aviation, together with the regulatory functions of the public transportation department within the Ministry of Construction were combined to form the new Ministry of Transport. The stated goal was to integrate the various forms of transportation: highway, waterway, and air. Nevertheless, the Ministry of Railway remained untouched, despite the claim of creating a “comprehensive regulatory body” for transportation. Furthermore, the State Post Bureau, which previously reported directly to the Premier, was put under the jurisdiction of the Ministry of Transport without a sound justification.

3.5 The Ministry of Personnel was combined with the Ministry of Labour and Social Security to form the new Ministry of Human Resources and Social Security (MHRSS). The Ministry of Labour and Social Security itself had been the result of a previous merger between the Ministry of Labour and Ministry of Social Security. Under the new MHRSS, a State Civil Service Bureau has been created to manage government employees, which was a function of the Ministry of Personnel in the past. It appears that from now, the new MHRSS will not only oversee the civil service through the newly­created Civil Service Bureau, but will also have to monitor the country’s labour needs.

3.6 Other adjustments amounted to mere name changes. The State Environmental Protection Agency, which had already been enjoying ministerial rank, was “upgraded” to become the Ministry of Environmental Protection. The State Energy Office was upgraded to the State Energy Bureau, remaining under the jurisdiction of the National Development and Reform Commission. The State Food and Drug Administration was downgraded by having to report to the Minister of Health from now, instead of directly to the Premier as in the past. In recent years, a large number of scandals related to food safety and drug regulation had emerged. Last year, retired director of the agency, Zheng Xiaoyu, was sentenced to death on bribery charges.

3.7 The Ministry of Construction, following the transfer of its function of regulating public transportation in cities to the newly­formed Ministry of Transport, has been renamed the Ministry of Housing and Urban­Rural Construction. In recent years, China’s real estate market has been a target of wild speculation. Complaints of soaring home prices have become a contentious issue. The new housing ministry has been tasked with overseeing housing supply and regulating the real estate market.

8 CHART 1

Old Bodies New Bodies New Additions or Relocation of Jurisdiction

State Defence Science and Technology Commission State Defence Science and Technology Bureau Ministry of Information Ministry of Industry Industry and Information State Bureau of Tobacco Sales

State Council Information Office

State Bureau of Civil Aviation Ministry of Communications

Ministry of Transport

State Post Bureau General Administration of Civil Aviation

(Public Transportation)

Ministry of Construction Ministry of Housing and Urban­Rural Construction

Ministry of Personnel

Ministry of Human State Civil Service Bureau Ministry of Labour and Social Resource and Social Security Security

Ministry of Health State Food and Drug Administration

National Development State Energy Bureau and Reform Commission

9 Economic state or service state?

4.1 The reorganisation of these few ministries did little to advance the government’s shift toward a service­oriented body that is limited in scope but able to provide effective regulation. The main macro­economic policymaking agencies, i.e. the National Development and Reform Commission, the People’s Bank of China, and the banking and insurance industries regulators, remained largely unchanged. The elevation of the State Environmental Protection Agency to a ministry amounted to a mere name change. The State Food and Drug Administration came under the governance of the Ministry of Health, as it was downgraded from an independent unit that reported directly to the Premier. The issue of industrial safety regulation was not addressed.

4.2 The inability of the leadership to make much­needed changes to the government structure and to become a more service­oriented, limited but effective regulatory state is due to the very nature of the Chinese state. In recent years, the government’s direct involvement in economic activities has increased, in spite of the country’s rapid advancement toward a market economy as well as the rise of the private sector. This development points to a tendency for state organs to seek revenue­ and profit­generating projects. The government is increasingly engaged in capital­intensive, high­return industries, such as petrochemicals, energy and car­making.6

4.3 Meanwhile, the state has tended to privatize or commercialize non­profitable public services in high demand such as public transportation, educational services and health care so as to transfer the costs of providing these services to private firms, which are ultimately passed on to consumers. In recent years, public transportation employees have protested against poor working conditions and low wages which have been brought about by the privatization of public services by local governments.

4.4 Given the state’s entrenched interests in profitable industries, any initiative to shift the government’s focus to provision of services is expected to meet strong resistance. To make matters worse, the government has strong incentives to re­enter economic sectors from which it had withdrawn. The creation of the Ministry of Industry and Information is a good example. In recent years, China has been placing a greater emphasis on capital­ and technology­intensive sectors such as steel making and metallurgy, petro­chemical industry, ship building, car making, heavy machineries, as well as high­tech industries. As a result, government­controlled firms or industrial parks have become huge generators of economic wealth. The industry ministry has been re­established due to the government’s need for firm control over these sectors.

4.5 The bias of the state toward profitable economic sectors and against service provision lead to two problems. The first is the inability for government to become service­oriented. As long as the state is deeply engaged in economic development, it will remain at a developmental stage instead of maturing into a service state.

4.6 The second issue is non­separation of regulator and regulated. In a developed market economy, the state does not directly engage in economic activities; the

6 One way in which the State controls large industrial firms is through the State Asset Supervision and Administration Commission (SASAC). Many scholars have pointed out this recent rise in corporate power in China. See, for example, Barry Naughton, "SASAC and Rising Corporate Power in China," China Leadership Monitor, no. 24 (2008). government is the regulator, and the firms are the regulated. Yet in China today, the government concurrently takes the roles of both the regulator and the regulated. For instance, when the Ministry of Environmental Protection tries to regulate violators of environmental laws, it may be directly or indirectly regulating another government unit. Many large Chinese firms carry ministerial or vice ministerial rank. Hence when a division within the Ministry of Environmental Protection issues an order to a vice­ministerial ranked firm, that order is likely to be defied.

4.7 These problems inherent in the structure of the Chinese government mean that any effort to reorganize and restructure the state is likely to be futile. In the recent history of government restructuring in China, the pattern of decentralization­recentralization has always repeated itself; the same can be said for the vicious cycle of downsizing and expansion. The goal of a service­ oriented, limited government possessing regulatory effectiveness remains hard to achieve.

New Faces of the Government

5.1 Though no major structural overhaul took place, a major cabinet personnel reshuffle was passed by the NPC. On 16 March, 2008, Hu Jintao was “elected” as President of China for another five­year term. He was also re­elected as Chairman of the State Military Commission, the chief commander of the China’s military forces. Incumbent Premier Wen Jiabao was “nominated” by Hu the following day to continue in his post, which was approved by the NPC. These acts of “election”, “nomination”, and “confirmation” were of course largely formalistic, because the selection and appointments had already been determined by the CCP’s Central Committee; the NPC merely served as a rubber stamp to endorse the Party’s decisions.

5.2 On 18 March 2008, Wen’s cabinet was presented to and approved by the NPC, in line with the constitutional procedure of forming a new cabinet every five years, which is such: in the preceding autumn, the Party Congress decides on the appointments which are then submitted to the national legislature in the following spring to be legalized.

5.3 The most notable appointments in the new cabinet are the four vice premiers: Li Keqiang, Hui Liangyu, Zhang Dejiang, and Wang Qishan. While Hui had 7 served as a vice premier in the last cabinet, the other three have been newly promoted. Interestingly, these three had previously held provincial posts. Li was party secretary of the industrial province of Liaoning in Northeast China from 2004 to 2007, before which he was governor and then party secretary of Henan in central China between 1998 and 2004. Zhang served as provincial secretary in Guangdong from 2002 to 2007 in southern China and in Zhejiang in eastern China from 1998 to 2002. Before serving in the country’s two economic powerhouses, Zhang was party secretary of Jilin in Northeast China from 1995 to 1998. Wang, who has a strong background in finance and banking, was mayor of Beijing between 2003 and 2008.

7 Among the four vice premiers of the last cabinet, one – Huang Ju ­­ died in office, two – Zeng Peiyan and Wu Yi – retired, having passed the age limit. Both are to turn 70 later this year. The age of retirement age for vice premiership appears to be around 67­68, but officials older then age of 62­63 are not likely to be promoted to be ministers or vice premiers.

11 5.4 Li is ranked No. 1 among the four vice premiers. He became the youngest member of the Party’s Political Bureau Standing Committee at the Party Congress last October. His position, along with his title of Executive Vice Premier, means he is being groomed as Wen’s successor in five years’ time. As part of Wen’s new administration, he is likely to take charge of the country’s overall economic portfolio. He is a trusted colleague and protégé of China’s top leader, Hu Jintao, and has good relationships with other top leaders, including Wen and Wu Bangguo, the chairman of the NPC.

Li Keqiang

Rank among the four Vice Premiers: No. 1

Age: 53

Cabinet Portfolios: • Executive Vice Premier • Economic Policies • Budgeting, Treasury, and Taxation

Background: • Holds a Ph.D. in Economics from Peking University • Provincial Governance: Party Secretary, Liaoning Province, 2004­2007 Party Secretary, Henan Province, 2003­2004 Governor, Henan Province, 1998­2003 • Communist Youth League: Alternate Secretary, Secretary, and then First Secretary, 1983­1998

Factional Affiliations: • Former colleague and protégé of President Hu Jintao • Leading figure of the Communist Youth League (tuanpai)

5.5 Hui Liangyu is ranked ahead of the other two vice premiers clearly due to his seniority. He is the oldest among the four and has already served one term as a vice premier. Despite his high ranking, his portfolios ­­ agriculture and several others – are the least significant.

5.6 Zhang Dejiang is ranked ahead of Wang Qishan as No. 3, also due to seniority, being two years older than Wang. He has been a member of the Political Bureau since 2002 while Wang was only promoted to the country’s most powerful decision­making body in October 2007. Zhang takes over the portfolios of retired vice premier Zeng Peiyan and also part of the responsibilities held previously by Wu Yi, which include industrial policies, state­ owned enterprises, and transportation. It has been reported that he will also chair the newly­created National Energy Commission, which will oversee China’s energy security issues and energy policies.

12 Hui Liangyu

Rank among the four Vice Premiers: No. 2

Age: 64

Portfolios in the Cabinet: • Agriculture • Water Resources • Ethnic, Religious, and Civil Affairs

Background: • Member of Hui ethnic group • Vice Premier, 2003­2008 • Provincial Governance: Party Secretary, Jiangsu Province, 1999­2002 Governor and then Party Secretary, Anhui Province, 1994­1999 Deputy Party Secretary, Hubei Province, 1992­1994 Provincial and Local Governments, Jilin Province, 1964­1990 • Central Government: Director, Central Policy Study Office, 1990­1992

Factional Affiliations: • Seen as close to former President Jiang Zemin

Zhang Dejiang

Rank among the four Vice Premiers: No. 3

Age: 62

Cabinet Portfolios: • Transportation • Industrial Policies, State­Owned Enterprises • Energy Security

Background: • Graduated from Kim Il Sung University of North Korea • Provincial Governance: Party Secretary, Guangdong Province, 2002­2007 Party Secretary, Zhejiang Province, 1998­2002 Deputy Party Secretary and then Party Secretary, Jilin Province, 1990­1998 Local Governments, Jilin Province, 1976­1986 • Central Government: Deputy Minister, Ethnicity and Minority Affairs, 1986­1990

Factional Affiliations: • Seen as close to former president Jiang Zemin

13 5.7 Wang Qishan, despite his rank as No. 4, will take charge of the most challenging yet possibly the most important portfolios. Wang is a very capable administrator and is well experienced in financial and banking regulation, as well as managing crises. In the late 1990s, when the financial industry in Guangdong Province fell into disarray after one major investment bank ­­ Guangdong International Trust and Investment Corp. ­­ ran into deep financial trouble, Wang was sent by the central government to clean up the mess.

Wang Qishan

Rank among the four Vice Premiers: No. 4

Age: 60

Cabinet Portfolios: • Finance and Banking • Foreign Trade

Background: • Provincial Governance: Mayor, Beijing Municipality, 2003­2007 Party Secretary, Hainan Province, 2002­2003 Executive Vice Governor, Guangdong Province, 1997­2000 Local Governments, Jilin Province, 1976­1986

• Central Government: Director, State Council Economic Reform Office, 2000­2002 Central Agricultural Policy Research Office, 1982­1988

• Banking Sector President, China Construction Bank, 1994­1996 Vice Governor, People’s Bank of China, 1993­1994 Vice President, China Construction Bank, 1989­1993 CEO, China Rural Trust and Investment Cooperation, 1988­1989

Factional Affiliations: • Member of the “Princelings”; son­in­law of the late economic planner and key policymaker, former vice premier Yao Yilin (in office 1978­1993) • Close aide to former premier and “Economic Tsar” Zhu Rongji

5.8 In 2003, shortly after Wang was appointed party secretary of the island province of Hainan in South China, the Severe Acute Respiratory Syndrome (SARS) epidemic broke out. Wang was immediately called back to Beijing by the central government and made mayor of the capital to mitigate the crisis that had resulted from the disastrous mismanagement of the epidemic by the Beijing municipal government. His competency in bringing the SARS epidemic under control earned him enough political capital for his promotion to vice premiership.

5.9 In recent years, China has been trying to cool its overheating economy without causing an abrupt slowdown. The country’s banking industry is in need of a

14 drastic structural reform in order to raise efficiency and boost profitability. Wang faces the challenging job of working with top banking and finance chiefs to carry out the necessary changes. He is likely to re­structure China’s banking and insurance regulatory regime by forming a “super­financial regulatory” body. 8

5.10 Other significant changes to the cabinet included the appointment of Liu Yandong as State Councillor. She replaces Chen Zhili and takes over the education and cultural affairs portfolio. Ma Kai, head of the National Development and Reform Commission, was promoted to chief of staff of the State Council, replacing Hua Jianmin as State Councillor and Secretary­General of the State Council. In fact, all five state councillors are new: Ma Kai (chief of staff), Liu Yandong (Education and Cultural Affairs), Meng Jianzhu (Public Security and Law Enforcement), Liang Guanglie (National Defence and State Security), and Dai Binguo (Foreign Affairs).

5.11 As for cabinet ministers, the changes have been rather significant. Out of the 28 ministers appointed five years ago, only four have been re­appointed to the same posts at this year’s NPC (see Appendix). Many replacements and reshuffles had taken place over the last two years before the convening of the NPC. The cabinet that was presented to and confirmed by delegates of the NPC had already been determined by the party and was already carrying out its job. Furthermore, the state budget passed by the delegates was for the fiscal year that started three months ago, which once again shows up the true nature of the Chinese legislature as a ”rubber stamp” institution.

Challenges ahead

6.1 Although the CCP congress last year set the direction of government reforms, the expected structural overhaul of China’s administrative structure did not happen at the NPC. The objective of the planned government reform is to transform the current developmental state into a modern regulatory state whose main functions are to regulate and provide services. Such a transformation will inevitably undermine deeply­rooted vested interests. The fact that the Wen administration had not been able to achieve this goal implies that intended reforms have come up against strong bureaucratic resistance. Needless to say, government reform is not simply a reorganization of government; more importantly it is a part of China’s overall political reform. Without meaningful political reforms, the leadership will find it hard to realize its goal of government reform. A modern regulatory state must be brought about by political reforms.

6.2 Due to the lack of a major structural reform, the reshuffling of personnel has become even more important. The changes in appointments approved by the NPC reflect a balance between factional politics and professionalism. Factional politics remains important since it is tied to political support. The new cabinet consists of people with different factional backgrounds, namely, the Chinese Communist Youth League, the “Princelings” and those who are closely associated with former leader Jiang Zemin. Nevertheless, all the new appointments had been made based on the appointees’ professional

8 “China opts for Wang as finance sector chief”, Financial Times, February 27 2008.

15 backgrounds. Because of the increasing complexity of the Chinese economy and society, professionalism plays an increasingly important role in dealing with major issues facing the country.

6.3 The personnel reshuffle helped consolidate Wen Jiabao’s power. During his first term, Wen’s position had been weakened by some key personnel appointments which had not been decided by Wen himself. Huang Ju, a key member of the so­called Shanghai group and a close associate of Jiang Zemin, was the No. 1 vice premier. Huang had lacked experience in running the country’s economy, especially the financial aspect. The prevalence of factional politics and a lack of professionalism of Wen’s first cabinet reduced the effectiveness of his leadership particularly in terms of economic control. Now, with the appointment of Wang Qishan as vice premier in charge of the financial sector, Wen can rely on Wang’s professional as well as administrative experience in dealing with most challenging aspects of economic management. Still, without an effective governmental structure, Wen has to rely on individuals like Wang to achieve his goal. In reality, any capable individual will likely be greatly constrained by the existing government structure.

6.4 Li Keqiang, the No. 2 in the State Council, would have to act like the Premier­ in­waiting. Being the second­highest­ranked, Li faces a dilemma in that he has to demonstrate his capability, which would require him to take initiatives in various areas including the implementation of further governmental reforms and policies without offending his colleagues. Support from the other bureaucrats is needed when the “election” takes place in five years, yet any major reforms are likely to affect his colleagues.

6.5 Meanwhile, the new administration is facing its toughest challenge this year in the form of the 2008 Olympic Games and its attending economic and social issues. Unrests in Tibet this month have already created one of the biggest headaches for the administration so far this year. Controlling and sustaining economic growth in the aftermath of the Olympic Games are also not easy tasks. Expanding local power coupled with the continuous weakening of central power, as well as globalisation all point to the urgent need for a new government structure in China. Yet such a structure has not materialised.

16 Appendix: Wen Jiabao’s Cabinet

Ministry or Minister Age Educational Previous Position Notes Commission Background Foreign Affairs Yang Jiechi 58 International Deputy Minister, same Ministry Relations Defence Liang Guanglei 68 Military PLA Chief of Staff National Development 62 Banking Deputy Secretary General, State First Time Zhang Ping & Reform Commission Council Appointee Education Zhou Ji 62 Engineering Mayor, Wuhan City, Hubei Science and Technology Wan Gang 56 Engineering President, Tongji University Non­CCP Industry and Director, State Asset New Ministry Li Yizhong Information 62 Engineering Supervision Commission 55 Engineering Governor, Inner Mongolia First Time Ethnic Affairs Yang Jing Appointee Public Security Meng Jianzhu 61 Engineering Party Secretary, Jiangxi State Security Geng Huichang 57 N/A Deputy Minister, same ministry 60 Deputy Secretary, Central Supervision Ma Wen History Discipline and Supervision Female Committee Civil Affairs Li Xueju 63 Party Affairs Deputy Minister, same ministry 57 Politics Deputy Party Secretary, Female Justice Wu Aiying Shandong Province Treasury Xie Xuren 61 Management Director, State Taxation Bureau Human Resource and 55 Engineering Minister of Personnel New Ministry Yin Weimin Social Security 57 Geology Deputy Secretary General, State Land Resource Xu Shaoshi Council Housing and Urban­ 59 N/A Deputy Minister of Construction New Ministry Jiang Weixin Rural Construction Railway Liu Zhijun 55 N/A Deputy Minister of Railway Transport Li Shenglin 62 Engineering Deputy Minister, NDRC Water Resource Chen Lei 54 Engineering Deputy Governor, Xinjiang 45 Agriculture Secretary General, Beijing Party Agriculture Sun Zhengcai Committee Environmental 59 Education Director, State Environmental New Ministry Zhou Shengxian Protection Protection Agency 59 Management Deputy Minister, NDRC, and Commerce Chen Deming Governor, Shaanxi Province 59 International Director, State Council First Time Culture Cai Wu Relations Information Office Appointee 55 Medical Vice President, National Non­ CCP Health Chen Zhu Science Academy of Science Demography and 54 Economics Deputy Minister, same ministry Female Li Bin Family Planning Engineering Chairman, China Securities People’s Bank of China Zhou Xiaochuan Regulatory Commission 52 Management Deputy Minister, Auditory First Time Auditory Liu Jiayi Appointee

Source: www.people.com.cn