The State Council of the People’s Republic of China (PRC) is the official state planner of the country. It supervises China’s huge state apparatus from the apex of a complicated hierarchy commissions and ministries and executes Party policies from local to the national governance with accountability to the National People’s Congress (NPC) although, in practice, the State Council forwards laws and policy measures to the NPC for formality approvals1. The NPC is equivalent to China’s parliament. Some consider it a space whereby representation where people from all walks of life can congregate to discuss and debate national affairs where others attribute NPC to a more consultative role and a political space of formality.

The Council’s biggest powers are China’s economic planning, formatting the country’s budget, legislation, social order and other aspects that involves the nitty-gritties of the lives of Chinese citizens and it meets once a month for deliberation but powers often rest with the Standing Committee [consisting of China’s Premier (Li Keqiang helming in the current scenario), four Vice-Premiers, State Councillors and the Secretary-General] within it that convenes twice weekly. State Councillors often have powerful advisory and intermediary roles. Sometimes when visiting from the US, for example, Foreign Secretaries from the US interacts with a State Councillor rather than the Chinese Minister of Foreign Affair. The current important personalities in the State Council are as follows:

Li Keqiang Premier, State Council Remain after 19th Party Congress
Liu Yandong Vice Premier, State Council Retire (was one of the female power holders in elite leadership)
Ma Kai Vice Premier, State Council Slated for retirement
Wang Yang Vice Premier, State Council Remain after 19th Party Congress, likely a one term individual, said to be part of a Guangdong clique
Zhang Gaoli Executive Vice Premier Retire, one of the few elite Chinese leaders trained in North Korea, formerly also a member of the Chinese Communist Party’s standing committee of the Politburo

 

In 2017, amongst other major initiatives, the State Council dealt with a number of crucial and urgent state matters, with both internal/domestic and external implications. Domestically, the issue of overcapacity was tackled. Initially, when the Belt and Road Initiative (BRI, China’s most important economic diplomatic initiative) was unfurled by President Xi Jinping, some observers (including skeptics) thought it was an exercise to expand China’s overcapacity production of perishable items like steel and coal. The Council’s Report on the Implementation of the 2016 Plan for National Economic and Social Development and the 2017 Draft Plan for National Economic and Social Development forwarded to the Fifth Session of the 12th National People’s Congress was approved/accepted on 15 March 2017 and the paper originators also sought feedback from the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).

In the same report, the Council highlighted the publicly released and enforced Guidelines on Addressing Overcapacity and Achieving a Turnaround in the Steel Industry and the State Council’s Guidelines on Addressing Overcapacity and Achieving a Turnaround in the Coal Industry to close obsolete facilities in an urgent manner, shut down illegal operations and enforce the laws and regulations, restraining overcapacity, manage retrenchments, arranged re-employment opportunities, manage debts and motivate firms to merge with compatible entities, restructure/reorganize debts, reform and transform, enhance capabilities and/or improve logistical and retail distribution2. In terms of other commodities, the State Council’s 2017 reform of the salt industry removed controls on producer, distributor and retail prices of salt and, in the same year, implemented a free market price system and subsidies for the acquisition and storage of corn in Northeast China and draw down grain and cotton stockpiles.3

Rationalization was also another major exercise carried out by the State Council in 2017. Domestically, the Chinese authorities wanted to consolidate the strength of Chinese banks by focusing on the competitive ones, merging the smaller ones and supporting the promising others. In 2017, the State Council released Guidelines on Proactively yet Prudently Lowering Enterprise Leverage Ratios (G.F. [2016] No. 54) to motivate mergers and acquisitions (M&As), firms restructuring, enhance market forces, manage debt-for-equity swaps with banks, create equity financing and implement broad politics to pare down business leverage ratios proactively. By 2016, third-party consultants were utilized by the Council to connect a handful of commercial banks and 20 ranking firms working with various agencies in debt-for-equity swaps valued at above 250 billion yuan.4

To set an example to others, the government itself also carried out rationalization and learning programs. Besides whipping private sector firms into shape, the Xi Jinping administration also intends to reduce wastage in government departments. The State Council, therefore, assumes the responsibility of going through the institutions to detect potential financial wastage for reducing costs in governmental expenditure. The Chinese Communist Party (CCP) leadership would like the State Council to reduce the list of items that require State Council’s government review procedure by 33.3% as an eventual goal with 165 items freed from the need for State Council review in 2016, standardized 192 intermediary services for government review and utilized the Guidelines on Deepening Reform of SOEs to remove SOEs of their responsibility to manage social programs and introduce mixed ownership for pioneering SOEs.5

Market competition and legal regulatory framework were also priorities for the State Council to shore up and enhance the protection of rights for stakeholders. In terms of legal initiatives, the State Council’s guidelines on improving the property rights protection were publicly published to subject the rights and interests of economic entities under various types of ownership to legal regulations and formatted guidelines to ensure fair competition prevented state bureaucracy from adopting policies or measures that eliminate or stifle competition.6

The major rationalization exercise carried out on external matters is probably found in the Belt and Road Initiative. The China State Council unfurled the Belt and Road Action Plan in 2015 with its framework worked out by the National Development and Reform Commission (NDRC, the major implementer of the BRI) to build a network of rail lines, highways, pipelines and electricity grids connecting China, Central Asia, West Asia and South Asia, with the Silk Road Economic Belt linking China to Europe through Central Asia and Russia, Persian Gulf through Central Asia and Southeast Asia, South Asia and the Indian Ocean 7. The NDRC together with Ministry of Commerce (MOC) and Ministry of Foreign Affairs (MOFA) produced a report titled “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” as a blueprint for guiding Belt and Road Initiative (formerly known as One Belt One Road or OBOR) in March 2015. In terms of propaganda8, the State Council-authorized 2015 report written by NDRC, MOC and MOFA emphasized the so-called “Silk Road Spirit” defined as inter-generational “peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit” and a “historic and cultural heritage shared by all countries around the world”. 9

Aside from propaganda, the State Council-approved vision statement also spelt out the desire to work on state-to-state cooperation through a multi-layered inter-government macro policy exchange and communication platform to look into common interests, build trust and confidence to seek consensus in order to have better coordination in Belt and Road economic activities, e.g. accelerating investments, breaking down investment barriers, negotiating on bilateral investment protection and double taxation avoidance agreements.10 Related to Belt and Road Initiative, the vision statement stated that customs clearance will be enhanced (faster inspection procedure) and made cheaper using a “single-window” system and Internet-based certification systems at the border ports; while supply chain safety and convenience are emphasized and the major priority appears to be assisting localization of economic benefits through Chinese firms’ investments with a focus on augmenting local community employment, livelihood improvement and ethical preservation of local biodiversity and natural environment.11 All these 2015 goals spelled out in the vision statement at an early stage of the BRI initiative, were eventually examined and ticked off in the 2017 report of the State Council.

Other than broad visions and nuts and bolts initiatives, the 2015 vision statement approved by the State Council suggested intensifying the construction of currency stability system, investment/financing/credit system in Asia by increasing bilateral currency swaps and combined contributions to Beijing-led multilateral Asian Infrastructure Investment Bank (AIIB), BRICS New Development Bank, financing arm for the multilateral Shanghai Cooperation Organization (SCO), SilkRoad Fund, China-ASEAN Interbank Association and SCO Interbank Association for multilateral loaning.12

By mid-2017, 2 years after the State Council’s vision report, China was pulling the brakes on what it considered excessive and irrational investments overseas, including those made under the umbrella of Belt and Road Initiative (BRI). The National Development and Reform Commission (NDRC) announced that it would guide Chinese firms making investments outside China to stop them from cannibalizing each other, motivate stronger companies to move into industries like farming and hi-tech manufacturing, take more care in resource and energy mining sectors, and/or perpetuating corruption and reduce risks in overseas investments.13 The State Council announced: “(We will) guide firms to fully consider national conditions and actual needs of target countries, pay attention to mutually beneficial cooperation with local governments and companies, and generate economic and social benefits”.14 The Council emphasized that investments made in real estates, tourism/hospitality/accommodations, popular cultural and leisure industries, sports-related facilities, movie-making business or any investments with safety and environmental issues would be controlled and limited while businesses and investments involving pornography, gambling and crucial military technologies and other forms of restricted technology will be outright banned.15

Bibliography:

BBC News, “State council” dated 2003 in the BBC News website [downloaded on 1 Jan 2017],available at http://news.bbc.co.uk/2/shared/spl/hi/asia_pac/02/china_party_congress/china_ruling_party/how_china_is_ruled/html/state_council.stm

International Enterprise Singapore China Group, “China’s Belt and Road Initiative (BRI) What it means for Singapore Companies” dated Sept 2017 in International Enterprise Singapore website [downloaded on Sept 2017], available at https://www.iesingapore.gov.sg/-/media/IESingapore/Files/Publications/IE-Insights/Vol31_China_FA_2.ashx

National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of
Commerce of the People’s Republic of China, “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” dated 8 March 2015 [downloaded on 8 March 2015], available at http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html

Reuters staff, “China to curb “irrational” overseas Belt and Road investment: state planner” dated 18 August 2017 in the Reuters website [downloaded on 18 August 2017], available at https://uk.reuters.com/article/us-china-economy-odi/china-to-curb-irrational-overseas-belt-androad-investment-state-planner-idUKKCN1AY0FN

Xinhua/Mengjie (Editor), “Full text: Report on China’s economic, social development plan” dated 17 March 2017 in Xinhuanet website [downloaded on 17 March 2017], available at http://www.xinhuanet.com/english/china/2017-03/17/c_136137416.htm

  1. BBC News, “State council” dated 2003 in the BBC News website [downloaded on 1 Jan 2017], available at http://news.bbc.co.uk/2/shared/spl/hi/asia_pac/02/china_party_congress/china_ruling_party/how_china_is_ruled/html/state_council.stm
  2. Xinhua/Mengjie (Editor), “Full text: Report on China’s economic, social development plan” dated 17 March
    2017 in Xinhuanet website [downloaded on 17 March 2017], available at
    http://www.xinhuanet.com/english/china/2017-03/17/c_136137416.htm
  3. ibid
  4. ibid
  5. ibid
  6. ibid
  7. International Enterprise Singapore China Group, “China’s Belt and Road Initiative (BRI) What it means for Singapore Companies” dated Sept 2017 in International Enterprise Singapore website [downloaded on Sept 2017], available at https://www.iesingapore.gov.sg/-/media/IE-Singapore/Files/Publications/IEInsights/
    Vol31_China_FA_2.ashx, p. 4
  8. The term ‘propaganda’ used in this writing is a value-neutral term referring to officially-issued viewpoints designed by state agencies to persuade other stakeholders of the validity and persuasiveness of the state’s views, it is a biased state-centric view rather than a terminology with negative connotation of brainwashing or intentionally misleading intended audiences of the material.
  9. National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” dated 8 March 2015 [downloaded on 8 March 2015], available at http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html
  10. ibid
  11. ibid
  12. ibid
  13. Reuters staff, “China to curb “irrational” overseas Belt and Road investment: state planner” dated 18 August 2017 in the Reuters website [downloaded on 18 August 2017], available at https://uk.reuters.com/article/us-china-economy-odi/china-to-curb-irrational-overseas-belt-and-roadinvestment-state-planner-idUKKCN1AY0FN
  14. ibid
  15. ibid
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Dr.Lim Tai-wei
Tai Wei Lim is a Senior Lecturer at SIM University (UniSIM) and a Research Fellow Adj. at the National University of Singapore (NUS) East Asian Institute. His research interests are in the energy histories of China and Japan and modern/contemporary East Asian history in general. He graduated from Cornell University with a PhD in history and teaches the world history course in UniSIM. He also conducts policy research on contemporary Sino-Japanese relations, popular culture and the soft power influence of the creative industries in Japan as well as Sino-Hong Kong relations. His latest co-authored book is Contextualizing Occupy Central in contemporary Hong Kong published by Imperial College Press in 2015.

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