Share on facebook
Share on twitter
Share on telegram
Share on whatsapp
Share on linkedin
Share on print
Share on email

Political Risk Watch: Decoding the State Council’s New State-owned Asset Management Report Requirement

◎ The introduction of the new State Council state asset supervision requirement signals trouble for the Jiang faction.


China’s State Council must submit a report on state-owned assets to the Standing Committee of the National People’s Congress (NPC) every year, according to a document by the Central Leading Group for Comprehensively Deepening Reforms (CLGCDR) issued on Jan. 14. The document is the first legislation issued by the Xi Jinping administration’s reform policy formulation and implementation body since the 19th Party Congress in October.

Document details:

1. The document cites earlier State Council observations that state-owned assets are not fully accounted, resulting in the NPC being unable to supervise the condition of state assets adequately.

2. The State Council must submit two types of reports to the NPC Standing Committee each year: A general report on the condition of various state assets, and a report on specific aspects of state assets, such as state-owned enterprises, state-owned financial institutions, state-owned non-commercial institutions, and state-owned natural resources.

3. The document also clearly outlines the reporting process and monitoring mechanism:

  • Before deliberating the annual report, the NPC Standing Committee will organize inspections or special investigations of state-owned assets.
  • During the deliberation of the report, the relevant State Council department directors must listen to opinions and answer questions.
  • After the deliberation, the NPC Standing Committee’s deliberated opinions must be submitted to the State Council Research Office for processing.
  • If the situation calls for it, the NPC Standing Committee may launch special inquiries to investigate specific issues, and pass legal resolutions.

The backdrop: After Deng Xiaoping’s death in 1997, the Jiang Zemin administration “privatized” state-owned assets in the name of reforming them. The peak “privatization” period occurred between 1998 to 2003, and coincided with the Jiang administration’s push to recruit businessmen and other “capitalists” into the Chinese Communist Party (CCP).

In what appeared to be an attempt to facilitate the “privatization” effort, the Jiang administration closed the State Council’s State-owned Assets Supervision and Administration Commission for six years. Influential officials, Party princelings, and former state-owned enterprise managers seized the window of deregulation to gobble up state-owned assets that were being sold to private investors on the market.

After many state-owned assets were privatized, their new owners started dismissing employees in bulk to lower operating costs. Labor disputes spiked: For instance, there were 33,000 cases of labor disputes in 1995, but 447,000 cases in 2006 and 690,000 in 2008.

Jiang Zemin dealt with the escalating social problems by intensifying suppression during his era of dominance (1997-2012). Between 2008 to 2012, the domestic security apparatus received huge sums in “social stability maintenance” funding: 405 billion yuan (2008), 474 billion yuan (2009), 549 billion yuan (2010), 624 billion yuan (2011), 702 billion yuan (2012). Indeed, domestic security spending outstripped defense spending in those years.

Why it matters: The introduction of the new State Council state asset supervision requirement signals trouble for the Jiang faction.

During the Jiang era, Jiang faction members controlled many Party-owned and state-owned businesses. For instance, purged China Telecom chairman Chang Xiaobing used to head China Unicom for 11 years. Jiang Mianheng, the elder son of Jiang Zemin, controlled China Netcom and China Unicom for many years through Shanghai Alliance Investment Ltd., the Shanghai municipal government’s investment arm. Meanwhile, former public security ministers Zhou Yongkang and Guo Shengkun both headed state-owned enterprises before entering politics.

Our take:

1. Xi Jinping is increasing the NPC’s supervisory power over the government apparatus. In some regards, the new procedure outlined in the CLGCDR document resembles that of a United States congressional oversight hearing.

2. By tightening supervision over state-owned assets, Xi is beginning to move against the Jiang faction members who control industries that are directly tied to the national economy.

3. Princelings in the financial sector who continue to resist Beijing’s policies could be targeted next under the anti-corruption campaign.

“Your publication insights tremendously help us complete our regular analysis on in-depth issues of major importance. ”
Ms. Nicoleta Buracinschi, Embassy of Romania to the People’s Republic of China
"I’m a very happy, satisfied subscriber to your service and all the deep information it provides to increase our understanding. SinoInsider is profoundly helping to alter the public landscape when it comes to the PRC."
James Newman, Former U.S. Navy cryptologist
“Prof. Ming’s information about the Sino-U.S. trade war is invaluable for us in Taiwan’s technology industry. Our company basically acted on Prof. Ming’s predictions and enlarged our scale and enriched our product lines. That allowed us to deal capably with larger orders from China in 2019. ”
Mr. Chiu, Realtek R&D Center
“I am following China’s growing involvement in the Middle East, seeking to gain a better understanding of China itself and the impact of domestic constraints on its foreign policy. I have found SinoInsider quite helpful in expanding my knowledge and enriching my understanding of the issues at stake.”
Ehud Yaari, Lafer International Fellow, The Washington Institute
“SinoInsider’s research on the CCP examines every detail in great depth and is a very valuable reference. Foreign researchers will find SinoInsider’s research helpful in understanding what is really going on with the CCP and China. ”
Baterdene, Researcher, The National Institute for Security Studies (Mongolian)
“The forecasts of Prof. Chu-cheng Ming and the SinoInsider team are an invaluable resource in guiding our news reporting direction and anticipating the next moves of the Chinese and Hong Kong governments.”
Chan Miu-ling, Radio Television Hong Kong China Team Deputy Leader
“SinoInsider always publishes interesting and provocative work on Chinese elite politics. It is very worthwhile to follow the work of SinoInsider to get their take on factional struggles in particular.”
Lee Jones, Reader in International Politics, Queen Mary University of London
“[SinoInsider has] been very useful in my class on American foreign policy because it contradicts the widely accepted argument that the U.S. should work cooperatively with China. And the whole point of the course is to expose students to conflicting approaches to contemporary major problems.”
Roy Licklider, Adjunct Professor of Political Science, Columbia University
“As a China-based journalist, SinoInsider is to me a very reliable source of information to understand deeply how the CCP works and learn more about the factional struggle and challenges that Xi Jinping may face. ”
Sebastien Ricci, AFP correspondent for China & Mongolia
“SinoInsider offers an interesting perspective on the Sino-U.S. trade war and North Korea. Their predictions are often accurate, which is definitely very helpful.”
Sebastien Ricci, AFP correspondent for China & Mongolia
“I have found SinoInsider to provide much greater depth and breadth of coverage with regard to developments in China. The subtlety of the descriptions of China's policy/political processes is absent from traditional media channels.”
John Lipsky, Peter G. Peterson Distinguished Scholar, Kissinger Center for Global Affairs
“My teaching at Cambridge and policy analysis for the UK audience have been informed by insights from your analyzes. ”
Dr Kun-Chin Lin, University Lecturer in Politics,
Deputy Director of the Centre for Geopolitics, Cambridge University
" SinoInsider's in-depth and nuanced analysis of Party dynamics is an excellent template to train future Sinologists with a clear understanding that what happens in the Party matters."
Stephen Nagy, Senior Associate Professor, International Christian University
“ I find Sinoinsider particularly helpful in instructing students about the complexities of Chinese politics and what elite competition means for the future of the US-China relationship.”
Howard Sanborn, Professor, Virginia Military Institute
“SinoInsider has been one of my most useful (and enjoyable) resources”
James Newman, Former U.S. Navy cryptologist
“Professor Ming and his team’s analyses of current affairs are very far-sighted and directionally accurate. In the present media environment where it is harder to distinguish between real and fake information, SinoInsider’s professional perspectives are much needed to make sense of a perilous and unpredictable world. ”
Liu Cheng-chuan, Professor Emeritus, National Chiayi University
Previous
Next