Reform underway for China's top economic planning agency

China’s top economic planning agency is likely to undergo a major transformation in the years ahead, as the Communist Party shows increased willingness to move away from an economy heavily reliant on investment towards more liberalised markets.

For decades, the National Development and Reform Commission (NDRC) has been dubbed “the little State Council” for its unparalleled power among government agencies to approve or reject major industrial projects. The commission is now expected to lose much of this oversight function, and will instead focus on devising mid- to long-term economic strategies.

The transformation of the NDRC’s role comes as the party plans to set up a central leading work group, probably headed by President Xi Jinping or Premier Li Keqiang, on deepening reforms. The panel will oversee and co-ordinate reforms in all kinds of areas including fiscal, financial, cultural, social, political and environmental, according to the resolution of party leaders following their third-plenum.

Such reforms are deemed crucial to China’s goal of maintaining economic growth of about 7 per cent for the years ahead as Beijing explore ways to boost domestic consumption as a new driver of the economy. The authorities realise that too-rapid expansion in investment is not sustainable, and has caused overcapacity in various industries, fuelled financial risk, and exaggerated the monopoly of state-owned enterprises.

Yale University professor Stephen Roach told the Post: “With the third plenum shifting the focus of China’s macro strategy from a production-oriented approach that was tailor-made for the NDRC to a more balanced consumer-led strategy, a new policy decision-making process is warranted.”

“Largely for that reason, the ascendance of the new leading committee threatens to marginalise the role of the NDRC,” said Roach, a former non-executive chairman for Morgan Stanley in Asia and a veteran China watcher. Chi Fulin , executive president of the Hainan-based China Institute for Reform and Development, expected that some NDRC reform functions would be transferred to the central leadership.