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China is restructuring key government agencies to outcompete rivals in tech

Chinese State Councilor and Secretary-General of the State Council Xiao Jie bows to delegates before delivering a speech during the second plenary session of the National People's Congress at the Great Hall of the People in Beijing on Tuesday.
Greg Baker
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AFP via Getty Images
Chinese State Councilor and Secretary-General of the State Council Xiao Jie bows to delegates before delivering a speech during the second plenary session of the National People's Congress at the Great Hall of the People in Beijing on Tuesday.

TAIPEI, Taiwan — China is proposing to vastly restructure its science, technology and finance regulators as part of an ambitious, ongoing effort to outcompete geopolitical rivals while also tamping down risk at home.

The reorganization attempts to modernize the Science and Technology Ministry and will create a new, consolidated financial regulator as well as a data regulator.

The changes were proposed by the State Council, akin to China's cabinet, during annual legislative and political meetings where Chinese leader Xi Jinping is also expected to formally confirm his third term as president.

Much of the annual meetings this year — called the Two Sessions in China — has been aimed at boosting the country's self-reliance in key industry and technology areas, especially in semiconductors, after the United States imposed harsh export sanctions on key chip components and software on China.

"Western countries led by the U.S. have implemented comprehensive containment, encirclement and suppression against us, bringing unprecedented severe challenges to our country's development," Xi was quoted as saying this week,in a rare and direct rebuke by name of the U.S.

Broadly, the Science and Technology Ministry will be reconstituted so as to align with state priorities in innovation, investing in basic research and translating those gains into practical applications, though the State Council document laying out these proposed changes had few details about implementation. The proposal also urges China to improve its patents and intellectual property system.

These changes, released by the State Council on Tuesday, still need to be officially approved this Friday by the National People's Congress, though the legislative body's delegates seldom cast dissenting votes.

China has undergone two ministerial reorganizations since Xi came to power in 2012, but this year's changes are the most cross-cutting yet.

The country will set up a national data bureau to specifically deal with data privacy and data storage issues, a responsibility previously taken on by the Cyberspace Administration of China (CAC). "A new regulatory body for data makes perfect sense," said Kendra Schaefer, a Beijing-based partner at consultancy Trivium China. "[CAC] was neither designed nor equipped to handle data security, particularly cross-border data security."

Also among the proposed reforms is melding the current banking and insurance watchdogs into one body, to expand the number of provincial branches under the central bank, and to strengthen the securities regulator.

Under Xi, China has stepped up regulatory oversight of banking and consumer finance. Finance regulators quashed a public offering of financial technology company Ant Financial and put it under investigation for flouting banking standards. Regulators also cut off lending to heavily indebted property companies, sending the property prices and sale spiraling downward. After three years of costly COVID-19 controls, China is also struggling to manage ballooning local government debts.

"It is set to address the long-standing contradictions and problems in financial areas," Xiao Jie, secretary-general of the State Council, said of the finance restructuring proposals in a statement.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

Emily Feng is NPR's Beijing correspondent.