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China to merge regulators, create new ministries in biggest revamp in years

Reuters  |  BEIJING 

By Shu and Se Young Lee

BEIJING (Reuters) - is merging its and and giving new powers to policymaking bodies such as the central in the biggest government shake-up in years.

The revamp is a cornerstone of Xi Jinping's agenda to put the leadership of the ruling squarely at the heart of policy with Xi himself at the core of the party.

The economy and the party have become ever more intertwined since the once-in-five-years party in October when Xi consolidated his grip on power, with party control deemed necessary to help push through reforms.

The long-awaited move to tighten oversight of the $42 trillion and comes as authorities seek more clout to crack down on riskier lending practices and reduce high corporate debt levels.

"Deepening the reform of the party and state institutions is an inevitable requirement for strengthening the long-term governance of the party," Liu He, Xi's top and confidante, wrote in a commentary in the on Tuesday.

On Sunday, presidential term limits were removed from the state constitution, giving Xi the right to remain in office indefinitely, and confirming his status as the country's most since died more than 40 years ago.

The heads of the new merged regulator, ministries and departments will be announced before the close of the annual session of parliament on March 20.

will also form a national markets supervision management bureau, according to a parliament document released on Tuesday.

The powerful bureau will take on the pricing supervision and from the (NDRC), Ministry of

Many Xi allies are expected to get top appointments including the of the National People's Congress, or parliament, and


is among the global economies seen as most vulnerable to a crisis, the for International Settlements (BIS) said at the weekend, though Beijing has maintained that debt risks are under control.

Speculation that Beijing was considering the creation of a super financial regulator has been rife since the Chinese stock market crash of 2015, which has been blamed in part on poor inter-agency coordination. The ensuing market rescue was also seen as heavy handed by some market watchers.

The merger of the Regulatory Commission (CBRC) and Insurance Regulatory Commission (CIRC) is aimed at resolving existing problems such as unclear responsibilities and cross-regulation, according to the parliament document.

The new merged entity will directly report to the State Council, or cabinet.

The function of making important laws and regulations of the CBRC and CIRC will be transferred to of (PBOC) as the central takes on a bigger role.

CBRC, currently headed by Guo Shuqing, was carved out of the central in 2003 under a directive, while CIRC was created in 1998.

The securities regulator - the Securities Regulatory Commission (CSRC) - will remain a separate entity, however.

"There is a valid argument to separate regulation of equity markets from that of the system. You don't want your monetary authority obsessed with supporting equity markets, because that can lead to bad macro policy," said Andrew Polk, a co-founding

"(It) goes beyond streamlining to over-concentration," Polk added.

CSRC "is both politically savvy and fairly powerful in his own right, at least when compared to other financial regulators. He's been seen to be doing a good job in the post and wouldn't want to be subordinated to the likes of "


China's financial system has become increasingly tough to regulate as it grows rapidly in size and complexity, emerging as one of the world's largest with financial assets at nearly 470 percent of gross domestic product, according to the

Companies registered as banks or insurers have also started dabbling in other areas of with many offering complex and making non-traditional investments.

Many brokerages also structure as a channel for hidden lending, in addition to the more traditional business of facilitating share trades and services.

"One area of systemic risk is insurance, and one of the problems is that some have fallen in the cracks between insurance and and nobody was looking after them," said James Stent, a former at two Chinese banks and author of "China's Transformation."

Regulatory arbitrage and risky cross-asset investments have worried policymakers.


According to the parliament document released on Tuesday, the government will create seven new ministries: natural resources; ecological environment; emergency management; agriculture and rural affairs; culture and tourism; veterans affairs; and the

Within the departments being restructured, some officials are concerned about the loss of some functions while others welcome the opportunity to gain new powers, according to people familiar with the situation.

"Everyone seems to regard these departments as their own interests - giving up a piece of yourself is very heart-wrenching but it's a pleasure to take a piece of someone else," said an at a ministry, declining to be named due to the sensitivity of the matter.

"Reforms are difficult."

The for led by former minister will be managed by the ministry, instead of the

The agriculture ministry, which had not undergone any major change in its role and oversight since 2013, will come under a new ministry that will also be in charge of rural development.

The proposed changes were discussed in parliament on Tuesday, and are expected to be formally approved on Saturday.

When the plan is passed, the cabinet will consist of 26 ministries and commissions in addition to the of the

(Reporting by Shu Zhang, Muyu Xu, and Vincent Lee; Additional reporting by Matthew Miller, and in BEIJING and John Ruwitch in SHANGHAI; Writing by Ryan Woo; Editing by Richard Pullin, and Kim Coghill)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 12:15 IST