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Finance to tech, Xi bringing key sectors under CCP control. He wants to deal with US better

Xi Jinping asked CCP to 'calmly observe' changes in the international situation, suggesting he is concerned about Chinese bureaucracy's overreactions.

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The media attention on the ‘two sessions’ meeting has focused on the work report presented by the outgoing premier Li Keqiang. But President Xi Jinping has plans to overhaul Chinese state governance with an eye on the US.

More than the 20th Party Congress, held in October 2022, the National People’s Congress (NPC) excites many Chinese politicians, bosses of state-owned enterprises, entrepreneurs, and military leadership. The NPC allows them to propose policy ideas, including budgetary allocation – though overall proposals need the Chinese Communist Party (CCP)’s approval.

But the ability of state institutions such as the State Council is set to be eroded further as Xi tightens his grip by plugging the CCP into remaining state institutions.

Rumours have been circulating about reforms to the State Council for the past week before the 14th NPC convened. Now, further details have trickled out what those reforms may entail.

Analysts have suggested that Xi is likely to strengthen his control on the finance and technology sectors by bringing certain ministries under the party’s direct supervision–and ending the State Council’s bureaucratic control.

The assessment is based on Xinhua News Agency quoting Xi as saying that the reform plan is geared towards “deepen[ing] structural reform of the financial sector” and “unified leadership over science and technology”.

The hint offered by Xinhua points toward setting up two new commissions, one for finance and another for science and technology. These commissions are likely to be run directly by the CCP functionaries to direct the regulation of the financial sector and guide the development of the science and technology sector.

The rumours about State Council reform were proved right late on 7 March when a new commission titled ‘State Financial Supervision and Administration Bureau’ was announced by the state media.

“Take unified responsibility for the supervision of the financial industry other than the securities industry, strengthen institutional supervision, behavioural supervision, functional supervision, penetrating supervision, and continuous supervision, take overall responsibility for the protection of the rights and interests of financial consumers, strengthen risk management and prevention and disposal, and investigate and deal with violations of laws and regulations in accordance with the law,” the state media reported on the role of the new financial body.

Another major proposed reform to the State Council was to move some responsibilities of the Ministry of Science and Technology to other ministries so that it can focus on Xi’s vision of tech self-reliance.

The Ministry of Science and Technology’s responsibility of ‘promoting agricultural and rural development through science’ was moved to the Ministry of Agriculture and Rural Affairs, and its responsibility to ‘promote organizing and formulating science and technology to promote social development plans and policies’ was handed over to the National Development and Reform Commission and some other government ministries.

The thrust of these reforms appears to be bringing more decision-making capacity under unified bodies which can be controlled directly by Xi.

“As the party committees [and] commissions will be given the overall decision-making mandate in this restructuring plan, there will be only execution roles left for the State Council’s corresponding structure,” said Deng Yuwen, an independent researcher in the US.

Beijing has been frustrated by the slow progress in developing an indigenous innovation and manufacturing base for semiconductor technology despite pouring billions into solving the problem.

Also read: China wants a ChatGPT-like AI chatbot. But it poses challenges to CCP’s censorship regime

Driven by US actions

The shift in focus on science and technology research to develop indigenous semiconductor technology and commodity supply chains is reflected by the sectors the delegates represent in the 14th NPC and CPPCC meeting.

According to an analysis by Nikkei Asia Review, about 100 delegates selected to attend the ‘two sessions’ meeting (lianghui) come from semiconductor and defence manufacturing industries and they belong to companies that US sanctions have targeted. Meanwhile, internet entrepreneurs such as Pony Ma of Tencent, Robin Li of Baidu and Wang Xiaochuan of Sogou weren’t invited to join CPPCC for the next five years.

On March 7, Xi used a new ‘tifa’ – “profound and complex changes in the international and domestic environments.” ‘Tifa’ are political ideas proposed by the CCP that can signal shifts in policy thinking.

Xi’s speech underscored the profound challenges in the international situation that China needs to respond to and prepare for. Xi was speaking to the members of the Democratic National Construction Association and the Federation of Industry and Commerce as part of the 14th CPPCC.

“We should remain calm and determined, and calmly observe the profound changes in the international situation, and calmly respond to a variety of risk challenges. We need to develop accurate knowledge of the change, scientific response, proactive change, timely optimization and adjustment of strategic strategies, but also to maintain strategic determination, bite the green hills, not relax, and not be afraid of various risks, towards the established strategic goals. We should unswervingly move forward,” said Xi in his speech.

The guideline to “observe calmly” suggests Xi’s concerns about his bureaucracy overreacting to the current international environment and his inability to coordinate actions of the Chinese bureaucracy – something Xi has expressed frustration over in the past.

In his speech, Xi said the challenges will only get severe going forward.

“In the coming period, the risks and challenges we face will only increase and become more severe,” said Xi Jinping

If Xi’s warning about the profound changes wasn’t enough, he made targeted comments against the US.

“In particular, Western countries led by the United States, have implemented all-round containment and suppression of China, which has brought unprecedented severe challenges to China’s development. At the same time, the country is also facing multiple difficulties such as repeated COVID waves and increasing downward pressure on the economy,” said Xi about the challenges faced by China.

Xi’s direct swipe at the US is rare as the frustration over the current phase of the US-China competition has hampered China’s economic growth and vision to become self-reliant in technology innovation.

Xi’s remarks on China’s challenges in the international context were echoed by the new Chinese foreign minister’s first official press conference at the lianghui meeting. Qin Gang held a two-hour-long press conference in Beijing where foreign Chinese press was allowed to ask questions.

“The US ‘Indo-Pacific Strategy’ boasts of freedom and openness, but in fact, it has been ganging up and engaging in various closed and exclusive small circles; claiming to maintain regional security, but in fact provoking confrontation and planning an ‘Asia-Pacific version of NATO’; preaching the promotion of regional prosperity, but in fact, it wants to “decouple and break the chain” and undermine the regional integration process,” said Qin Gang during the press conference.

When asked about Taiwan, Qin Gang opened a copy of the Chinese constitution and said that “Taiwan is part of the sacred territory of the People’s Republic of China. It is the sacred duty of all Chinese people, including Taiwan compatriots, to complete the great cause of reunifying the motherland,”

Beijing’s reforms to the financial sector, science and technology, and the attack on the US have revealed Xi’s struggle in all domains from the economy to foreign affairs. Despite wanting to take a less confrontational approach, Xi drives the rhetoric of being at loggerheads with the US.

The ‘two sessions’ meeting has once again confirmed that Beijing considers all crucial aspects of its thinking of domestic and international affairs from the lens of geopolitical competition with the US.

The author is a columnist and a freelance journalist. He was previously a China media journalist at the BBC World Service. He is currently a MOFA Taiwan Fellow based in Taipei and tweets @aadilbrar. Views are personal.

(Edited by Prashant)

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