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China considers overhaul to streamline government

Tuesday - 2/26/2013, 7:42am  ET

In this Sunday, Jan. 6, 2013 photo, worker labors at the Hangzhou-Changsha High-Speed Railway under construction in Shaoxing county in east China's Zhejiang province. The Ministry of Railways operates ultramodern bullet trains but its singular focus on rail at a time of booming car ownership and air travel makes it a relic from an era when 100 ministries ran China's planned economy. Modernizing the rail ministry — a Soviet-style behemoth with 2.1 million employees, its own courts and police and 1.7 billion passengers last year — by making it part of a transportation "super ministry" would be a likely priority. (AP Photo) CHINA OUT

JOE McDONALD
AP Business Writer

BEIJING (AP) -- The Ministry of Railways operates ultramodern bullet trains but its singular focus on rail at a time of booming car ownership and air travel makes it a relic from an era when 100 ministries ran China's planned economy.

That could soon change. China's new Communist leaders are considering another shake-up of a sprawling bureaucracy that has added market regulators and shed agencies that once dictated prices and told companies what to produce.

Modernizing the rail ministry -- a Soviet-style behemoth with 2.1 million employees, its own courts and police and 1.7 billion passengers last year -- by making it part of a transportation "super ministry" would be a likely priority.

Such change would be politically fraught since it threatens top jobs and influence, the lifeblood of party factions. And it could require years to complete. But reformers say it is urgently needed to keep the world's second-largest economy growing strongly.

"If the new leaders want to demonstrate they are in charge, they want to break the logjam, then this is a great time," said Dali Yang, a specialist in the Chinese government at the University of Chicago.

Though details of the streamlining have yet to be announced, General Secretary Xi Jinping and other Communist Party leaders opened a three-day meeting Tuesday to discuss a reorganization plan, state media reported. The closed-door meeting of the Central Committee will also approve the appointment of top government officials who will be publicly announced early next month at the annual session of the ceremonial legislature. That will complete a power transition begun in November when Xi was installed as party leader.

A goal of the government consolidation is to create "super ministries" that pull together a jumble of agencies with overlapping duties in broad fields such as transportation, media, energy, finance and health.

Under scenarios discussed in official media, the Ministry of Railways might be united with agencies that oversee road and air travel.

The Ministry of Culture might absorb regulators for film, publishing and TV, where boundaries have been blurred by the rise of Internet- and mobile phone-based media. The hated family planning agency, which enforces China's birth limits, might be folded into the Ministry of Health.

The potential impact on private and foreign companies is unclear, but American and European business groups regularly urge Beijing to simplify regulation and approval processes they say slow investment and hamper operations.

China has undergone repeated bouts of government restructuring to keep pace with a changing economy.

In 1982, the number of Cabinet-level ministries and commissions was slashed from 100 to 61. In the 1990s, museum pieces such as the Ministry of Machine Building that were no longer needed to set prices and tell companies what to produce were eliminated. In 1998, then-Premier Zhu Rongji shrank the number of ministries further from 40 to 29.

At the same time, Beijing created Western-style regulators for banks and securities. A Ministry of Commerce was formed in 2003 to bring together trade and planning agencies, simplifying some trade regulation to make it easier for private sector traders to function.

Such change can provoke furious opposition. In the last round of proposed reforms in 2008, the only thing leaders finally agreed on was to make the environmental regulator a full-fledged ministry in response to an avalanche of pollution scandals.

Creating fewer, bigger ministries would fit with party pledges to make the economy more productive and keep incomes growing. Xi has called for a "renewal of the Chinese nation," raising hopes a new leader whose attitude toward reform is still unclear might throw his political weight behind remaking the government.

There is, however, no indication the restructuring will affect state-owned companies that dominate most major industries including telecommunications, banking and oil and have direct ties to the top ranks of the party. That will blunt the impact of the restructuring on making markets more competitive and productive.

If leaders take action, they are likely to produce no more than one or two concrete proposals to start, and that might not be until August, said a European diplomat who follows the internal workings of China's government.

And if they fail to release firm plans before the party's plenum late this year, that will suggest they have failed to agree, said the diplomat, who asked not to be identified by name because he was not authorized to talk to reporters.

In a reflection of political resistance, the Chinese business magazine Caijing says proposals to group together "big energy," ''big culture," "big finance" and "big system reform committee" were dropped from a draft plan.

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