5 Super Ministries Announced: Administrative Grid Lock Coming to China

Tuesday, March 11, 2008 2:39
Posted in category Red Tape

For anyone who thought consutructing a JV in China was difficult, here is a story for you.

With the NPC now half complete, the curtain was brought up and 5 new super ministries have been unveiled:

  • Ministry of Industry and Information
  • Ministry of Human Resources and Social Security
  • Ministry of Environmental Protection
  • Ministry of Housing and Urban-Rural Construction
  • Ministry of Transport

and according to this AFP article:

Under the new system, China’s cabinet, or State Council, will have 27 ministries and commissions, one less than before. No time line was given for when the reformed cabinet would come into effect.

With that in mind, I would like to prepare every reader who is invested in, or looking to invest in, that what we are going to witness is pure gridlock as these groups come together. When we met last month to discuss the draft Energy Law, we looked at the structure of it, and there were 13 ministries/ 2 committees involved.. and even if it were pass tomorrow, it would still take years for the organization to come together. YEARS

It is still too early to really predict the level of chaos these integrations will create, and it is going to be hard to judge what the products of the integration will look like, but I have a strong suspicion that once integrated we will see a much higher level of enforcement on many fronts…. especially when it comes to the environment

One ministry I would like to pull out in a later post (once I get my hands on more information), will be with the Ministry of Transport. China’s Logistics industry is currently running at 20% GDP, double the U.S. or E.U. markets… so reducing will be a priority as planning of networks can be centralized…. theoretically.

With that, the only value I can really add is just for everyone to push their projects through as soon as possible.  If your project is caught up in the middle of the integration, it will create issues…. people will move, standards/ regulations may conflict, etc.

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7 Responses to “5 Super Ministries Announced: Administrative Grid Lock Coming to China”

  1. Fons Tuinstra says:

    March 11th, 2008 at 7:05 am

    It is indeed a beauty of a problem. There is no doubt that the administrative reforms in China should continue (mind you, they cleared up already most of the ministries that were around fifteen years ago). But adding a new layer is indeed only going to add to the problems and not solve them.
    By leaving the original ministries (and their often powerful allies) in place, the new super ministries will at best offer a new administrative barrier.
    China does need administrative reform and a disconnect between commercial and political interests, but this is most certainly not going to be the way.

  2. Levin says:

    March 11th, 2008 at 8:38 am

    It all depends on the purpose of this reform. It s more about power redivision than smoothing the administrative process for the benefit of the people, much less foreign investors. This reform is designed so that no one is responsible for anything, with plenty of opportunity of pointing fingers. “You don’t understand the process and organization or our new ministries.” will be a good one for at least a decade. The reform is to ensure that organizations responsible for outcomes are not authorized to do so, and maximize the number of ministries having authority over the same issue.

  3. Chris Devonshire-Ellis says:

    March 11th, 2008 at 7:02 pm

    Hey Rich – they actually planned this 5 years ago – at the last NPC – and agreed not to push it through then to give them time to ‘manipulate’ behind the scenes so that this transition process would be smooth. Much of the behind the scenes work to pave the way for this reorganisation has already been done. I don’t foresee much of a problem actually. Chris

  4. Rich says:

    March 11th, 2008 at 7:17 pm

    @ Fons,

    I would agree that there is, and there always will be change, but these minitries – along with the last 2 years of new regulations – are the foundation of what china will work from for the next 50. there are bound to be tweaks, but this should be the last major overhaul

    @ Levin
    good point. Knowing the goal is critical.

    @ Chris
    Agreed, and to be sure it is a system that has been in planning for a lot longer than that…. but it is still going to be a mess that I myself would not want my documents in the middle of. After all, the work that has been done to this point has been the easy stuff.

    R

  5. Chris Devonshire-Ellis says:

    March 11th, 2008 at 10:46 pm

    China had a Ministry of Energy before, up to 1993, when it was disbanded after Deng found out China only had 2 weeks energy supplies left and had to go cap in hand internationally and beg for oil. The country came perilously close then to total economic and energy collapse. He tore the entire Ministry apart due to its incompetence and divided up it’s various responsibilities to get rid of all the inefficiencies and fired a whole bunch of officials in disgrace. This division of responsibilities has kept China out of subsequent energy troubles, but has now again become largely inefficient and disconnected with the various bodies not communicating or coordinating properly. So we’re only seeing a return to a normal situation. China needs an efficient Energy regulator and its getting one. The man on the top is Premier Wen Jiabao – who was a professional geologist and oil extraction engineer before entering politics – Chris

  6. Rich says:

    March 12th, 2008 at 12:50 am

    Chris

    Where this will get interesting, is that beyond the massive infrastructural problems, there are two big issues that Energy will need to deal with. Pricing of energy (will continue to be controlled by NDRC) and rail capacity (controlled by the new and improved ministry of transport).

    Let’s assume MOT and MOE get along and are able to plan, where I see future issues will be in pricing. Do you think Wen Jia Bao will move the pricing control from NDRC to MOE?

    R

  7. Chris Devonshire-Ellis says:

    March 12th, 2008 at 3:42 am

    Good question. I suspect it will remain with the NDRC. Premier Wen has a strong power base there also so I can’t see any need to change for changes sake. Pricing should probably in my mind remain there as it affects other issues apart from fuel, and the NDRC are not industry specific, they have data and think tanks on a whole raft of issues and would be more objective I feel. I’m due to see Premier Wen and the various Ministers, including the new State Energy Commission actually in May during my annual visits around the Beijing corridors of power so will ask. It’ll turn up in China Briefing as usual when I’ve finished finding out what I can. – Chris