China is reviving the ruling party’s control over financial oversight

China’s ruling Communist Party announced Thursday the creation of committees to oversee finance and technology.

The changes come as Chinese President Xi Jinping sees unity under the party as essential to building the country. This contrasts with the trend of Chinese leaders in past decades to delegate more power to the government and its ministries.

A new Central Finance Committee Chinese state media reported Thursday that the party’s “centralized and unified leadership on financial work” is to be strengthened, according to a CNBC translation. The report said the committee is responsible for high-level planning for financial stability and development.

The Chinese government’s annual legislative meeting this month emphasized that tackling financial risks is a priority for policymakers this year.

The report said the administrative office of the new commission would take over responsibilities for the Financial Stability and Development Commission of the State Council — a group that was once oversaw by the retired Liu He and has now been dissolved.

State media said that along with the administrative office, a “central committee for financial work” would be set up to focus on ideological and partisan business in the finance industry.

While not specified by state media, a financial action committee of the same name was formed in the aftermath of the 1998 Asian financial crisis. The committee dissolved after about five years, leading to the creation of the now-defunct Chinese banking regulator in 2003.

It is unclear how the committee’s future work will compare with history.

In the late 1990s and early 2000s, the Central Financial Action Committee helped make financial regulation and supervision simpler — reducing the influence of powerful interest groups on regulators, said Sebastian Hellmann, a professor of political economy in China at the University of Trier. in paper. He later became the founding president of the Mercator Institute for China Studies.

“But hierarchical institutions of party oversight were unable to introduce market-based incentive structures for financial executives and failed to suppress financial mismanagement and corruption,” Hillman wrote in 2004. The increasing activity of foreign investors.

Thursday’s announcement included previously published details of plans to restructure the State Council – the highest executive body of the Chinese government – with the creation of the Central Commission for Science and Technology.

The restructured Ministry of Science and Technology has the responsibilities of the Party Committee.

The State Council changes created a National Department of Financial Regulation to oversee most of the financial industry—except for the securities industry. The plan also changed the designation of the China Securities Regulatory Commission within the State Council from one similar to the Council’s Development Research Center to that of the Customs Agency.

Beijing has not yet announced who will head the new financial department or party committees.

The changes announced Thursday are set to go into effect at the national level by the end of this year.

Other new commissions include groups to oversee the party’s work on industry associations, and Hong Kong and Macao affairs, state media said. Beijing has tightened its control over regions that – under the “one country, two systems” structure – enjoy freedoms not found on the mainland.

Xi — China’s president and party general secretary — has consolidated his power and has overseen an increase in the party’s presence in the economy, including among non-state-owned enterprises.

The new committees are part of the party’s central committee, which has about 200 members. From these members comes the core leadership – the Politburo and its Standing Committee.

Membership changes are made every five years at party congresses, the last of which was held in October. At that congress, Xi paved the way for his unprecedented third term as president and rallied the party leadership with loyalists.