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1. Will China’s new financial regulatory reform be enough to meet the challenges?

Author:
Martin Chorzempa and Nicolas Veron
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Effective financial supervision plays a crucial role in maintaining financial stability and a healthy financial system. China’s leadership has made financial risk a core priority, and in reforms approved in March 2023, it reassigned regulatory responsibilities, creating a new supervisory body that will take over some responsibilities from the central bank, the banking and insurance regulator, and the securities regulator. The aim is that a change to the financial supervisory architecture (who does what in financial supervision) will make China’s system more effective and stable. In this policy brief, we argue that this incremental reform will not solve the core issues China faces in financial supervisory effectiveness. We provide an overview of China’s large and complex financial system, including its largely state-owned banks (some of which are the largest in the world by assets), securities markets and other financial intermediaries. Traditional divisions between different types of activities and institutions have been blurred by the rise of large financial conglomerates, risk-transfer techniques and internet-based finance. Reforms in 2018 to China’s supervisory architecture did not eliminate perceived shortcomings, including failures to effectively regulate financial conglomerates, fintech and regional banks. We then survey global benchmarks against which China’s financial supervisory architecture can be compared, including the United States and European Union. China’s supervisory system is already more streamlined, at least on paper, than either of these most comparable global counterparts. Like them, China’s system does not correspond exactly to any of the three textbook archetypes of supervision: sectoral, twin-peaks or integrated supervision. Ultimately, the effectiveness of China’s financial supervisory architecture suffers from excessive state intervention in the financial system through other channels, including through the unique and pervasive influence of the communist party, which hampers supervisory independence and makes it difficult to establish accountability for regulatory failures. While the recently announced reform may improve coordination across supervisory bodies, coordination within the new quasi-integrated supervisor, across central departments, and between them and local branches, will remain a challenge.
Topic:
Reform, Regulation, Finance, and Financial Stability
Political Geography:
China and Asia

2. China Maritime Report No. 28: Bitterness Ends, Sweetness Begins: Organizational Changes to the PLAN Submarine Force Since 2015

Author:
J. Michael Dahm and Alison Zhao
Publication Date:
06-2023
Content Type:
Special Report
Institution:
China Maritime Studies Institute, U.S. Naval War College
Abstract:
“Above-the-neck” reforms in the People’s Liberation Army (PLA) that began in 2015 directed the development of a new joint operational command system that resulted in commensurate changes to PLA Navy submarine force command and control. Additional changes to tactical submarine command and control were driven by the evolution and expansion of PLA Navy surface and airborne capabilities and the introduction of new longer-range submarine weapons. Follow-on “below-theneck” reforms inspired significant organizational change across most of China’s military services. However, the PLA Navy submarine force, for its part, did not reorganize its command structure but instead focused on significant improvements to the composition and quality of its force. Between 2017 and 2023, the PLA Navy submarine force engaged in a notable transformation, shuffling personnel and crews among twenty-six submarines—eleven newly commissioned and fifteen since retired—relocating in-service submarines to ensure an equitable distribution of newer, more capable submarines across the fleet. Observations of infrastructure improvements at PLA Navy submarine bases portend even more changes to submarine force structure in the coming years.
Topic:
Armed Forces, Reform, Maritime, Submarines, and People's Liberation Army (PLA)
Political Geography:
China and Asia

3. At a Dead End? China’s Drive to Reform Defense Science and Technology Institutes Stalls

Author:
Arthur S. Ding and K. Tristan Tang
Publication Date:
01-2023
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
Since becoming China’s top leader ten years ago, General Secretary Xi Jinping has sought to sustain a three-decade effort to reform the defense industry in order to advance the development of defense technology and improve the People’s Liberation Army’s (PLA) capabilities. Recent reforms have focused on transforming defense science and technology (S&T) institutes into enterprise-like entities, but due to political and economic impediments, progress has been slow. This article examines the rationale for defense industry reform, assesses progress in implementation and explains difficulties encountered in the reform process.
Topic:
Science and Technology, Reform, and Defense Industry
Political Geography:
China and Asia

4. Decoding China’s Dilemma: The Difficulties Of Economic Reform

Author:
Sunny Cheung
Publication Date:
12-2023
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
On November 27, the State Council of the People’s Republic of China (PRC) unveiled a new policy, titled “Notice on Strengthening Financial Support Measures for the Private Economy (关于强化金融支持举措 助力民营经济发展壮大的通知)” (People’s Bank of China, November 27). The notice introduces a set of 25 measures crafted to reinvigorate the private sector. These prioritize key areas such as technological innovation, green initiatives, and primary support for small to medium-sized enterprises. The package includes increasing financial assistance and gradually enhancing the proportion of loans to private businesses. It underscores the importance of facilitating credit, lowering interest rates, issuing bonds, and other kinds of financial instruments to meet the varied financing needs of private enterprises. This policy measure echoes mandates put forth during the 20th Party Congress in October 2022 and Central Financial Work Conference held at the end of October 2023 in response to China’s deepening economic woes (Xinhua, November 1). This backdrop has prompted policies aimed at addressing the challenges facing the Chinese economy. In October, the PRC National Bureau of Statistics announced that the Consumer Price Index (CPI) fell by 0.2 percent year-on-year—worse than expected and marking a contraction since July (RTHK, November 9). This ominous data, which includes price deflation for both July and October this year, is indicative of significant weakness in domestic demand, particularly due to the underperforming real estate market, which affects citizens’ expectations for asset prices. The ongoing economic downturn in China also refutes the notion that economic chaos would clear up after the abandonment of the Zero-Covid policy. This situation is also similar to the Japan-style recession in the 90s in which consumption and investment are further repressed in favor of paying down debt. China’s recent response has been to implement a series of economic stimulus measures in an attempt to revive its weakening national economy.
Topic:
Economics, Reform, Business, and Banking
Political Geography:
China and Asia

5. The Chinese Debate on Economic Reform

Author:
Arran Hope
Publication Date:
09-2023
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
A steady drumbeat of ominous data and troubling commentary on the state of China’s economy has punctuated the summer months. Reports from the commentariat in the anglosphere have provided diagnostic analysis and detailed potential policy solutions that the Chinese government might pursue. However, China’s central decision makers in the Politburo or in the National Development and Reform Commission (NDRC), are more likely to take their cues from internal advisors and domestic experts within the PRC than from those outside. As such, one fruitful exercise is to take the temperature of voices within the system to determine the extent to which their perceptions align or diverge from those in the West, and to ascertain which views carry weight with the final arbiters of economic policy in Beijing. By doing so, analysts outside of China may better comprehend the future (mis)steps that China will take as it struggles to achieve its aim of “basically realizing socialist modernization.” In July, the Chinese government held several meetings and released documents pertaining the economy. On July 24 the Politburo met to discuss the economy as it usually does this time of year. But on the same day, a 17-point plan was issued by the NDRC, following on from a 31-point plan co-issued by the State Council and the Central Committee ten days prior. These send a clear message about the concern in government over China’s straitened circumstances. Indeed, just this week, the NDRC announced a new “private economy development bureau” to further support private industry (NDRC, September 4). The assessment of the situation is put bluntly in the Politburo readout: “the current economic system is facing new challenges… insufficient domestic demand, difficulties in some enterprise’s operations, multiple risks in key areas, and a complex and severe external environment.”
Topic:
Development, Economics, and Reform
Political Geography:
China and Asia

6. Beijing Winter Olympics 2022: Sports, Law, and Policies

Author:
Tim Harcourt, Deborah Healey, Keiji Kawai, and Yang Pei
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
China Studies Centre, The University of Sydney
Abstract:
The 2022 Beijing Winter Olympics were hosted amid the Covid-19 pandemic and surrounded by concerns and controversies. This Understanding China Brief results from a roundtable discussion organized by the China Studies Centre and the Centre for Asia and Pacific Law of Sydney University on 3 February 2022 to examine four aspects of the Beijing Olympics: boycotts, COVID- 19 control, law reform, and the economics of the Olympics.
Topic:
Economics, Reform, Sports, Conflict, Olympics, Pandemic, and COVID-19
Political Geography:
China and Asia

7. Will the Xi Jinping Leadership Take Up Reformist Policies After the 20th Party Congress?

Author:
Willy Wo-Lap Lam
Publication Date:
09-2022
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
That President Xi Jinping and his faction will dominate the 20th Party Congress is apparent from the Politburo announcement that the week-long, five-yearly conclave will take place on October 16. The Politburo meeting, which was held on August 30, said that the guiding principle of the party and country would remain “Xi Jinping Thought on Socialism with Chinese characteristics for a new era” (Gov.cn, October 16). The Politburo reasserted that the Chinese Communist Party (CCP) would follow principles laid down by Mao Zedong, Deng Xiaoping, Jiang Zemin, Hu Jintao, and above all, Xi Jinping. However, the dictums on reform and the open door – as well as the “lie low” foreign policy – promulgated by “Chief Architect of Reform” Deng in the 1980s and 1990s were conspicuously absent from the Party Congress announcement. Instead, the communique emphasized the so-called “three continuances” (三个继续, san ge jixu). This is a reference to Xi’s efforts to uphold Mao Zedong-style “common prosperity” (共同富裕, gongtongfuyu); to sustain “party construction” (党的建设 (dang de jianshe) in order to ensure the loyalty of cadres; and to work toward the formation of a “community with a shared future for mankind” (人类命运共同体,renlei mingyun gongtongti) (Xinhua, August 30; Ming Pao, August 30).
Topic:
Politics, Reform, Leadership, Domestic Politics, and Xi Jinping
Political Geography:
China and Asia

8. Early Warning Brief: Introducing the “New, New” China Coast Guard

Author:
Ryan D. Martinson
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
The Jamestown Foundation
Abstract:
In the past decade, the China Coast Guard (CCG, 中国海警, zhongguo haijing) has experienced two major reforms. The first, which began in 2013, uprooted the service from the Ministry of Public Security—where it was organized as an element of the People’s Armed Police (PAP)—and placed it under the control of the State Oceanic Administration (SOA), a civilian agency. In the process, the CCG was combined with three other maritime law enforcement forces: China Marine Surveillance (CMS), China Fisheries Law Enforcement (CFLE), and the maritime anti-smuggling units of the General Administration of Customs. The resulting conglomerate was colloquially called the “new” CCG, differentiating it from the “old” CCG of the Ministry of Public Security years. The second reform began in 2018, when the “new” CCG, now swollen with the ranks of four different forces, was stripped from the SOA and transferred to the PAP, which itself had just been reorganized and placed under the Central Military Commission (CMC) (China Brief, April 24, 2018). While much research has been done on the first reform, little is known about the second, at least in the English-speaking world. This article seeks to answer basic questions about the “new, new” CCG. What are its roles/missions, organization, and force structure? How does it differ from the CCG of the SOA years? How is it similar? What progress has been made two years after the second reform began?
Topic:
Law Enforcement, Armed Forces, Reform, and Borders
Political Geography:
China and Asia

9. The (Im-)Possibility of Rational Socialism: Mises in China’s Market Reform Debate

Author:
Isabella Weber
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Investigate the long first decade of reform in China (1978-1992) to show that Mises, in particular his initiating contribution to the Socialist Calculation Debate, became relevant to the reconfiguration of China’s political economy when the reformers gave up on the late Maoist primacy of continuous revolution and adhered instead to an imperative of development and catching up. During the Cultural Revolution, Mao had rejected the notions of efficiency and rational economic management. In the late 1970s, the reformers under Deng Xiaoping’s leadership elevated these notions to highest principle. As a result, Mises’ critique that socialism could not achieve a rational economic order came to be debated throughout the 1980s and Chinese economists developed their own reading of Mises and the Socialist Calculation Debate. When Deng Xiaoping reinstated market reforms in the early 1990s after the Tiananmen crackdown, a history of thought review of the possibility of rational socialism and socialist markets helped to justify the Socialist Market Economy with Chinese Characteristics the official designation of China’s economic system to this day.
Topic:
Markets, History, Reform, Economy, and Socialism
Political Geography:
China and Asia

10. China’s COVID Response and the State of Local Finance in the Xi Jinping Era

Author:
Christine Wong, Carl Riskin, and Qin Gao
Publication Date:
09-2021
Content Type:
Video
Institution:
Weatherhead East Asian Institute, Columbia University
Abstract:
In China’s decentralised fiscal system, since virtually all vital public services such as education, healthcare, and social welfare are provided by local governments, a well-functioning intergovernmental fiscal system is essential to ensure local governments have adequate incentives and resources to perform their role. Since 1978, China has overhauled its public finances to create a system able to finance government operations, support economic growth, and supply revenues for the government’s ambitious industrial policies and international initiatives. The COVID-19 pandemic has posed new challenges to China’s public finance that is likely to continue in the years to come. This lecture provides an update on local finance through three decades of reform including those implemented since 2013, when a comprehensive package was announced, with promise of a realignment of central-local revenues and expenditures by 2020. The findings are that local fiscal status has deteriorated since 2015 due to a combination of slowing growth, tax cuts, and reform pressures. This has already led to a decline in social spending as a share of GDP, threatening to reverse some recent gains in improving public services and undermining other policy goals. This event is part of the 2021-2022 lecture series on “COVID-19 Impacts and Responses in China and Beyond” and is co-sponsored by the China Center for Social Policy and the APEC Study Center at Columbia University
Topic:
Reform, Finance, Fiscal Policy, Xi Jinping, and COVID-19
Political Geography:
China and Asia