Chinese leader Xi Jinping attends the Shanghai Cooperation Organization (SCO) leaders' summit in Samarkand, Uzbekistan, on Sept. 16, 2022. (Sergei Bobylyov/Sputnik/AFP via Getty Images)
The Chinese Communist Party (CCP) intensifies control over the economy with a new vice premier and new supervisory bodies.
Under Xi Jinping, the CCP has continuously tightened its grip on the economy, including finance and banking. Now, newly-appointed Vice Premier He Lifeng and several new party-led bodies will ensure the country’s financial system aligns with CCP principles. Infusing CCP values into banking and financial systems is the latest step backward to a time of more orthodox central planning. China’s fastest economic development came during its period of opening, but now Xi appears to value party ideology over economic growth.
He, a close ally of Xi, has been working for the central government since the 1980s, experiencing the shift from full communism to market socialism, to liberalization, and now to a greater consolidation of CCP control under Xi. As vice premier, he will oversee industrial policy and trade negotiations. He spent the past five years as the leading central planner for China’s economy and will now have even more influence to ensure Xi’s plans and edicts are followed.
A migrant worker crosses a road after arriving on a long-distance bus in Beijing on March 10, 2021. (Greg Baker/AFP via Getty Images)
As China’s economic growth slows, the CCP’s approach has been a return to reliance on state-owned enterprises and CCP supervision of companies. Xi and He both favor state-led growth, focusing on state-owned enterprises and the public sector. On the other hand, this means increasing China’s debt, which is already 300 percent of GDP.
He was previously the chairman and CCP secretary of the National Development and Reform Commission, a major national planning agency responsible for shifting the country away from its dependence on foreign companies while promoting state-owned enterprises.
In addition to appointing a new premier, several new financial supervisory bodies are being established. These bodies, which the CCP central committee will oversee, include the State Administration for Financial Regulation (SAFR), the Central Financial Commission (CFC), and the Central Financial Work Commission (CFWC).
The SAFR will oversee the financial sector, excluding securities, and report directly to the State Council, chaired by Premier Li Qiang. According to its 2023 budget, the SAFR plans to inspect 2,500 banking institutions and 800 non-banking financial institutions nationwide. A CCP reform plan published in March stated that the purpose of the CFC is to “strengthen the party’s Central Committee’s centralized and unified leadership over financial work.”
The CFWC, which will be led by a politburo member, is responsible for overseeing the ideological and political role of the CCP within the Chinese financial system. As a party-building commission, the CFWC will ensure that the financial system is aligned with the goals and theories of the CCP, as well as the party’s morals and discipline.
Technically, the CFWC is not a new organization but the rebirth of the original CFWC, established in 1998 under former leader Jiang Zemin. At that time, the CFWC was meant to secure a role for the CCP in the banking and financial system but without influencing business development. The old CFWC, which was disbanded in 2003, was meant to ensure the separation of government and business. Under Xi’s leadership, the CFWC will assist in incorporating the financial sector into this amalgamation. With the reestablishment of the CFWC, Xi and his allies will be able to more quickly restructure elements within the financial industry, purging the last holdouts from previous administrations, and filling positions with Xi loyalists.
At a time when the U.S. Federal Reserve (Fed) is raising interest rates, and China is taking expansionary policies, the People’s Bank of China will be losing its ability to enact independent monetary policy. In the United States, political parties, government, and business are separate entities. And within the government, there is a division of powers with checks and balances. Furthermore, the Fed is independent of the government. In China, Xi holds the top posts in both the party and the government. His loyalists, appointees, and politburo members will now have more direct control over banking and finance. It is telling that Xi instituted the Belt and Road Initiative because now all roads seem to lead to Xi.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Antonio Graceffo, PhD, is a China economic analyst who has spent more than 20 years in Asia. Mr. Graceffo is a graduate of the Shanghai University of Sport, holds a China-MBA from Shanghai Jiaotong University, and currently studies national defense at American Military University. He is the author of “Beyond the Belt and Road: China’s Global Economic Expansion” (2019).
