China’s Policy Lab: The National Development and Reform Commission

Who sets petrol prices, decides the thickness of plastic bags, the length of roads and the size of Disneyland Shanghai?  In China these key decisions are made by the National Development and Reform Commission (NDRC). This body which lies under the State Council (equivalent to the cabinet) has a powerful role to play in determining China’s macroeconomic direction, its strategic energy policy and policies on climate change. It also approves and formulates major infrastructure projects, it helps to set the price of key products and commodities and host of other functions.

These place the NDRC at the centre stage when it comes to resolving important questions around China’s future, the restructuring of the economy away from manufacturing towards services and consumption, further liberalisation of sectors which are dominated by state owned firms and (along with the Ministry of Foreign Affairs and Ministry of Commerce) the formulation of the new Silk Road Economic Belt.

The Silk Road Economic Belt was announced by Chinese Premier Xi in 2013 as a grand continent wide economic and political project, but the details, the coordination and implementation will have to be done by government ministries like the NDRC. The financing will come from organisations like the China Development Bank and the Silk Road Fund, firms like China Railway Construction Corporation will be doing the building work but the NDRC will be orchestrating the overall strategy, trying to ensure projects are done in unision and add up to a coherent whole.

But some feel the NDRC is too rooted in its Soviet inspired past (it was formed in the aftermath of the revolution – like many other Chinese institutions) to meet the needs of modern day “socialist market” China. The NDRC has a natural tendency towards government based solutions and state direction for the economy, which might clash with the overall desire for more market based solutions.

The NDRC is now headed by a newly appointed Xu Shaoshi, who was apparently brought in as an outsider to introduce new ideas and shake the institution up a bit, similarly the appointment of Liu He as a Vice-President was significant as he contributed to a World Bank report advocating market based reforms in China, both signals that the country’s top politicians want to promote change within the organisation.

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