Xi's planned revival of Chinese financial watchdog exerts more party
control
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[March 01, 2023]
By Joe Cash
BEIJING (Reuters) - Plans by China's Communist Party to revive a
high-level economic watchdog after two decades signal President Xi
Jinping push to increase oversight of the financial sector, analysts
say, part of a wider tightening of control by Xi and the party.
Xi, who secured a precedent-breaking third leadership term in October,
is planning to resurrect the Central Financial Work Commission (CFWC),
which will be directly under central party leadership, two people
briefed on the matter told Reuters.
A decision to revive the commission may be revealed following the annual
gathering of the National People's Congress (NPC), the people said. The
NPC, to begin its session on Sunday, is set to confirm a new slate of
economic leaders chosen by Xi.
The State Council Information Office did not immediately respond to a
request for comment.
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The CFWC was introduced in 1998 during the tenure of Jiang Zemin,
building a role for the party within the central bank and financial
regulators but without influencing their business, state media reported
at the time. It was disbanded in 2003.
"If the CFWC is indeed revived, it will hold strong influence over the
financial system, including making personnel appointments in key
positions," said Xin Sun, senior lecturer in Chinese and East Asian
Business at King's College London.
"Through the CFWC, Xi and his allies could more rapidly roll out a
reshuffle to replace the remaining legacy technocrats with people more
loyal to them," he said.
The CFWC would be headed by a member of China's elite seven-member
Politburo Standing Committee, the two sources said, with incoming
premier Li Qiang or Ding Xuexiang the leading contenders, one of them
said.
China's financial sector is overseen by the People's Bank of China (PBOC),
the China Banking and Insurance Regulatory Commission, the China
Securities Regulatory Commission, with the cabinet's Financial Stability
and Development Committee at the top.
All are government bodies, as opposed to party organisations.
Under the new proposed structure, the party would take on a
direction-setting role for the economy and regulatory bodies.
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![](../images/030123PIX/news_v8.jpg)
Chinese President Xi Jinping attends the
China-Arab summit in Riyadh, Saudi Arabia December 9, 2022. Saudi
Press Agency/Handout via REUTERS
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"The situation is vastly different to when the CFWC was set up the
first time," according to Xu Tianchen, economist at the Economist
Intelligence Unit.
CHECKS AND BALANCES?
During Jiang's era, state media spoke of a need to ensure a
separation between the responsibilities of the party and those of
government and business. Under Xi, the party's role is much more
pervasive.
"Overall, the top leadership is not very satisfied with the
situation in the financial sector, and the problem is related to the
political stance among the state-owned financial institutions," said
Xu, pointing to what he said was frustration among senior party
officials that their directives are not properly implemented.
Analysts said the PBOC could lose more of its already limited
independence if the CFWC was brought back with a remit that included
determining the direction of economic policy.
"Xi throughout wants centralised, vertical power through Party
committees that directly report to him," said Alfred Wu, associate
professor at the Lee Kwan Yew School of Public Policy at the
National University of Singapore.
"The problem is, we don't know whether the CFWC will have any checks
and balances," he said.
Iris Pang, chief economist for Greater China at ING, said the CFWC
could be a better way to monitor financial system risks emerging
from industries such as real estate.
"But this could also lead to policies replacing some market forces,
which may not be ideal for financial liberalisation", she said.
(Reporting by Joe Cash; Additional reporting by Laurie Chen in
Beijing, Xie Yu in Hong Kong and the Beijing newsroom; Editing by
Tony Munroe)
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