China Parliament Votes For Government Cuts

Chinas parliament on Tuesday voted overwhelmingly to approve a plan for a radical trimming of the government.

A total of 2,814 delegates voted for the measure to axe 15 ministry-level bodies and millions of civil service jobs. There were just 12 votes against and 33 abstentions.

Delegates clapped in unison after results of the voting flashed on two giant electronic boards flanking a stage in the cavernous main chamber of Beijings Great Hall of the People.

The plan was the centrepiece of this years annual session of the National Peoples Congress. It is one of a number of measures China is taking to overhaul its economy and escape the Asian financial crisis.

 

Although the plan calls for the creation of four super-ministries, the overall number of ministries and commissions will be cut to 29 from 40.

The objective of the current restructuring is to form a highly efficient, well-coordinated and standardised administrative system, the official Xinhua news agency said. It would enable China to build a contingent of administrators who are competent and professionally specialised.

China sports authority aims for stoc market gold Chinas sports commission, a high-profile loser in a drastic government downsizing, is about to get into a new game the stock market.

A company backed by the China State Physical Culture and Sports Commission, one of 15 ministry-level bodies to get the axe, plans to list shares worth $30 million on the Shanghai stock exchange this month.

The transformation of Chinas top sporting authority into a money-spinning enterprise is part of Beijings strategy to hive off the commercial branches of government.

Soon-to-be-listed China Sports Industry Co will build stadiums and sponsor basketball, soccer and volleyball events. Regulatory functions of the former commission will be switched to a cabinet bureau.

Government downsizing could have a far-reaching impact on Chinese stock markets, and on Chinese red chip firms listed in Hong Kong.

It will mean more listings, but also more uncertainty as industries dominated by state-owned firms undergo wrenching changes because of the countrys most ambitious government reorganisation. The incompatibilities of government institutions to the development of a socialist market economy have become increasingly apparent, Premier Li Peng told parliament. explaining the downsizing.

Unwieldy organisation and failure to separate the functions of the government from those of enterprises have given rise to bureaucracy, promoted unhealthy practices and created a heavy financial burden.

Financial analysts said the principle of the reforms was positive for the market, but lack of details on the mechanics of the change could weigh on sentiment.

The markets love reform plans but they hate actual reforms, at least for listed shares, said Chris Cogswell, an analyst for Nikko Research Center in Shanghai.

Among other axed cabinet bodies about to spin off huge industrial and commercial enterprises are the ministries of coal, power, machine building and chemicals.

The ministries of electronics, posts and telecommunications, and radio film and television are to be merged under a new information super-ministry.

Many of these entities will list on Chinas A share market, said Bruce Richardson, the head of ABN-AMRO Asia in Shanghai, referring to domestic currency shares reserved for local investors.

Those that want to list B shares will find that investors will be much more choosy than in the past. Class B shares are denominated in hard currency and traded mainly by foreign institutions.

Class A shares are already reeling due to a flood of new issues arising from the quasi-privatisation of state industry. Chinas Communist Party leaders last year gave a new push to reform state firms through new share issues.

Analysts said the message was mixed for Hong Kongs red chips, firms incorporated in Hong Kong with mainland Chinese backing and which benefit from injections of assets from their parents, some of which are ministries.

It was not clear how the relationship between red chips and their mainland parents would play out, and what they could expect regarding government-directed asset injections, they said.

The support coming from the parent may not be as strong as before, said an analyst for a Japanese securities firm in Hong Kong.

Analysts said Hong Kong-listed China Telecom could be hurt by the scrapping of the Ministry of Posts and Telecommunications, since the move might allow rivals to advance.

But oil exploration firm CNPC (Hong Kong) Ltd, a unit of China National Petroleum Corp, could benefit from possible asset injections and greater industry efficiency due to a reorganisation of the oil industry after the Ministry of Chemical Industry was dissolved, they said.