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China's Communist Party

Shake-up in chain of command looms as Xi Jinping’s leading group on economy is elevated

New status could change the command chain, analysts say

PUBLISHED : Wednesday, 21 March, 2018, 11:55pm
UPDATED : Thursday, 22 March, 2018, 3:00pm

The Communist Party leading group that sets China’s direction on key economic issues has been given the status of a commission, in a move analysts say may further tighten party control of policymaking.

The Central Leading Group for Financial and Economic Affairs is led by President Xi Jinping, and his trusted aide Liu He has been director of the group’s office since 2013.

Little is known about how the group actually operates, aside from information gleaned from occasional dispatches about its meetings from official news agency Xinhua.

The new status could see a change in the chain of command, analysts said, and the cabinet could end up taking orders from it.

“The leading groups are not official organs – they can hold meetings but cannot directly issue orders to the government departments. But this elevation would institutionalise its decision-making power and may change the command chain in the government,” said Xie Yanmei, a researcher with Gavekal Dragonomics.

“It’s becoming much clearer that the party makes policies and the government departments implement their decisions,” she said.

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Three other leading groups – on reform, cybersecurity and foreign affairs – have also become commissions as part of Xi’s ambition to have the party controlling all aspects of the country.

The change will make it easier for the party to implement its decisions, but observers said it would do little to reassure foreign businesses who want Beijing to deliver on its promises to open up the financial sector.

With Premier Li Keqiang as its deputy and Politburo members and State Council department heads making up the leading group, Xi has described it as “an important platform” for the party’s leadership on the economy.

It shares an office with economic planner the National Development and Reform Commission at present, but that could change under the new structure.

Details of how the new commissions will function have yet to be released.

Liu was also appointed vice-premier during the National People’s Congress over the weekend.

At the World Economic Forum in Davos, Liu said Beijing would unveil opening-up measures this year that could exceed market expectations, and that China’s economic transformation would create huge opportunities for foreign companies.

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But with no further details of these reforms released, frustration is building among foreign firms and governments that want to see changes in market access and business practices, with a trade war looming between China and the United States.

Christopher Balding, an associate professor at the HSBC Business School in Shenzhen, said turning the leading group into a commission would not do much to change how foreigners perceive China’s progress on reforms.

Foreign companies had heard so many promises that China would open up and reform, he said, but they wanted concrete and immediate action.

But Xie with Gavekal Dragonomics said “the direction of reform is a political issue not an institutional matter”, and that Beijing would follow its own path on reform, not the liberalisation advocated by the West.