Bloomberg News

China Plans Revamp of Railways, Energy, Food Safety Agencies

March 11, 2013

China Plans Revamp of Railways, Energy, Food Safety Ministries

The rail ministry is the nation’s biggest issuer of corporate notes, with 2.66 trillion yuan ($428 billion) of liabilities, larger than Denmark’s economy. It has 2 million employees. Photographer: Tomohiro Ohsumi/Bloomberg

China plans to revamp government bodies responsible for energy, railways and food safety as the country’s new leaders seek to cut red tape and graft in the biggest top-level reorganization since 2008.

The Ministry of Railways will be split and the food and drug regulator will given more power in a bid to improve safety, according to a plan announced yesterday. Maritime law enforcement will be brought under one body as China tussles with neighbors including Japan and Vietnam over territorial claims.

The changes may allow Xi Jinping, set to take over as China’s president on March 14, to assert greater control over vital sectors of an economy that grew last year at its slowest pace since 1999. After the government swelled under outgoing leader Hu Jintao, Xi may be seeking to devolve power to state- owned companies and give ministries a greater regulatory role.

“Every 10 years a new generation of leaders come to power and at least in the beginning want to show everyone they want to make a change,” Ding Xueliang, a professor at Hong Kong University of Science and Technology who teaches Chinese politics, said by telephone. “There is more hope now because there’s increasing domestic pressure and greater international challenges, and the sense of crisis among the new leaders is more striking than before.”

Maritime Law

The State Oceanic Administration will now oversee the coast guard, the fisheries enforcement command and the maritime anti- smuggling unit, which had all been under different administrations, according to the official Xinhua News Agency.

Tensions between China and its neighbors in the South China Sea have spurred concern that competing territorial claims will disrupt economic relations between the Association of Southeast Asian Nations and the group’s largest trading partner.

The railway ministry’s administrative duties will be transferred to the Ministry of Transportation and commercial operations will be spun off to form a new company, China Railway Corp., according to the plan. The reorganization won’t affect investment, Railways Minister Sheng Guangzu told reporters in Beijing yesterday.

The reorganization of the rail ministry comes almost two years after a high-speed train crash killed 40 people near the eastern Chinese city of Wenzhou. A government investigation blamed the July 2011 disaster on mismanagement and design flaws, and former Rail Minister Liu Zhijun was among officials held responsible. Liu, who was ousted on corruption allegations, was later expelled from the Communist Party.

Biggest Issuer

The rail ministry is the nation’s biggest issuer of corporate notes, with 2.66 trillion yuan ($428 billion) of liabilities, larger than Denmark’s economy.

“We view the reform positively,” Barclays Plc analysts led by Patrick Xu said in a note to clients yesterday. “We expect it will be easier for China Railway Corp. to restructure its assets.”

The National People’s Congress is scheduled to approve the plan March 14, according to an agenda for the annual meeting. That’s the day Xi is expected to take the presidency as the country wraps up a once-a-decade leadership transition. On March 5, outgoing Premier Wen Jiabao set a 2013 economic-growth target of 7.5 percent, unchanged from last year when actual expansion slowed to 7.8 percent.

Seventh Time

The changes announced yesterday mark the seventh time the government has tried to restructure ministries in 30 years, the official Xinhua News Agency reported. Several overlapping bodies remain, such as ministries for agriculture and water resources and another minister-level body that administers forests

“I have looked at restructuring for three decades and I keep seeing the same agencies,” said Jean-Pierre Cabestan, head of the department of government and international studies at Hong Kong Baptist University. “There’s an impression of deja vu.”

In other changes, the National Energy Administration will take over power-market regulation. The administration is currently a branch of the National Development and Reform Commission, the nation’s top economic planner, and oversees the oil, natural gas, nuclear and renewable energy sectors.

Natural Resources

Securing the natural resources needed to fuel China’s economic growth has been a priority for the ruling Communist Party, with the cabinet in 2010 forming an energy commission headed by Wen. Chinese companies announced more than $25 billion of overseas energy acquisitions last year, a 39 percent increase from 2011, according to data compiled by Bloomberg.

A new general administration will be responsible for overseeing the safety of food and drugs, according to yesterday’s plan. Other changes include merging the press and broadcasting regulators and combining family planning with the health ministry. The report showed the People’s Bank of China will remain within the State Council.

Wen said in his annual work report to the National People’s Congress on March 5 that China will reform and perfect the nation’s safety supervision system for food and drugs. During his tenure, the government faced safety scares ranging from contaminated milk to chicken meat with excessive levels of antibiotics.

To contact Bloomberg News staff for this story: Benjamin Haas in Hong Kong at bhaas7@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net


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