March 14, 2014



he 2014 National People’s Congress (NPC), which wrapped up on March 14th 2014 in Beijing, had been eagerly awaited by China watchers as it followed on from the blueprint of deepening reform released at last November’s Third Plenum of the Communist Party's 18th Central Committee. Yet those expecting Premier Li Keqiang to further articulate that grand strategic vision from the government perspective were instead presented with a pragmatic operational implementation plan in his Government Work Report. While this in part reflects the getting-things-done leadership style of Li Keqiang, more fundamental reasons lay in the changing power and governance structure of China. The two newly-established “super powers”, the National Security Commission (NSC) and the Central Leading Group for Comprehensively Deepening Reforms (CLDCDR), have formed a new layer of power and taken away the strategic decision making role from the State Council. Both “super powers” are organizations of the CPC and answer to the Politburo. The role of the State Council, the Government of China, is now focused on execution and implementation. Therefore, it is not surprising that the Government Work Report at the annual NPC this year focuses on operational and executional topics, and this will likely be the pattern going forward. But make no mistake: while the State Council’s role is changing, Li Keqiang’s role is not weakened as some might speculate. Li Keqiang is Xi Jinping’s partner in the reform drive and will play a critical role as first deputies of both “super power” organizations.



One small action is more important than a thousand words

Interesting to note is that during the NPC session period, it was revealed that the Office of the CLGCDR will sit at the CPC Central Committee’s Policy Research Office and that CLGCDR will play four roles in the deepening reform: overall design, implementation coordination, addressing issues that affect the overall reform, have long-term impact and are cross geographies or cross departments, and supervision. The parallel release of the information on CLGCDR organization and its roles further defined and announced the execution function of the State Council.


ocusing on the pragmatic operational implementation plan of the Government, Premier Li Keqiang told his team working on drafting the Government Report that it should only include promises on which the government can deliver. He set three principles for 2014 economic and social development plan: 1. Create impetus by deepening reform. “Reform has brought us the greatest benefits. China's reform has entered a critical stage and a deep water zone. We must rely fully on the people, break mental shackles and vested interests with great determination, and pursue economic structural reform as the key step to deepen comprehensive reform in all areas. In carrying out reform, we need to focus on areas where the public call for reform is strongest, the most pressing problems hindering economic and social development, and links on which there is extensive public consensus.” 2. Keep economic performance within a proper range. “We will improve the macro-control policy framework, maintain a lower limit to ensure stable growth and employment and an upper limit to keep a cap on inflation, and continue to implement a proactive fiscal policy and a prudent monetary policy.” 3. Work hard to raise the quality and returns of development, promote industrial upgrading and keep improving people’s wellbeing. “The development we seek is development that raises the quality and returns of development, promotes industrial transformation and upgrading, and improves people's lives.”

Why does it matter to companies which operate in China? China’s power structure and policymaking dynamics are changing. In the past, businesses could largely focus their policy studying and government stakeholder engagement at two levels: the central government (i.e. the State Council, ministries and administrations) and local governments. From now on, they would need to understand strategic decisions made by CLGCDR, which will set the direction for the central and local governments to implement. The challenge is that the picture is not yet clear on how to access to and engage with key stakeholder of the newlyestablished power layer.


4. Advancing agricultural modernization and rural reform and development: increasing agricultural production capability and guaranteeing basic selfsufficiency of cereal grains and absolute grain security, concentrating investment on building a number of major water conservation projects, and granting farmers more property rights. 5. Carrying out a new type of people-centered urbanization: putting people as first priority, and integrating the development of industrialization, IT application, urbanization and agricultural modernization. 6. Using innovation to support and lead economic structural improvement and upgrading: accelerating reform of the science and technology management system, encouraging enterprises to set up research institutes and implementing preferential policies such as extra deductions for R&D expenses, and strengthening intellectual property rights protection. 7. Accelerating the development of education, health, culture and other social programs: consolidating national basic medical insurance system and integrating the basic medical insurance system for rural residents with that for non-working urban residents, strengthening urban and rural medical assistance and emergency assistance, and abolishing the practice of compensating for low medical service charges with high drug charges. 8. Making coordinated efforts to ensure and improve people’s wellbeing: making employment as top priority, deepening reform in the income distribution system, and establishing a unified basic old-age insurance system for both rural and urban nonworking residents. 9. Building China into a beautiful homeland with a sound ecological environment: taking strong measures to strengthen pollution prevention and control such as shutting down 50,000 small coal-fired furnaces and implementing clean water action plan; and strengthening energy conservation and emission reduction and imposing a ceiling for total energy consumption.

Major Tasks of 2014
1. Making breakthroughs in reform in important areas, such as economic structure, administrative system, fiscal and tax system, financial sector; and improving the distribution and structure of the state-owned sector. 2. Ushering in a new phase of China's opening to the outside world and ensuring its high standard performance: opening up more service sectors to foreign capital, leveling the playing field for domestic and foreign enterprises, making it a strategic priority to upgrade exports and promote balanced growth of foreign trade, and increasing China’s competitiveness through expanding its business presence overseas. 3. Making domestic demand the main engine driving growth: enhancing consumption ability by increasing people’s income, fostering new areas of consumption, supporting nongovernmental investment in elderly care, health, tourism and culture, and promoting information consumption.

Streamline Administration and Delegation of Power
Premier Li Keqiang has made this as a priority task of 2014 government work plan, and he believes it is “a revolution the government imposes on itself”.

For More Information, Please Contact:
Cindy Tian Tel: +86 10 5828 6505 Email: Qu Hong Tel: +86 10 5828 6556 Email:



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