Explainer | China’s Ministry of Commerce: what is Mofcom and what is it responsible for?
- China’s Ministry of Commerce (Mofcom) was established in March 2003 and is responsible for trade negotiations and the relationship with the World Trade Organization (WTO)
- As a cabinet-level executive agency under the State Council, Mofcom has 29 departments overseen by minister Wang Wentao
What is Mofcom?
China’s Ministry of Commerce (Mofcom) was established in March 2003 as part of an all-around institutional reorganisation conducted by the State Council, the country’s top administrative body.
Mofcom was largely based on the former Ministry of Foreign Trade and Economic Co-operation, while also incorporating the functions of the State Economic and Trade Commission and the State Development Planning Commission.
The changes ended more than five decades of separation between the domestic and foreign trade governance after the original Ministry of Trade – which was established in 1949 – was renamed the Ministry of Foreign Trade in 1952.
As part of its commitments to the WTO, China agreed that all domestic and foreign companies would be granted the right to trade within three years, meaning foreign trade was no longer a privilege.
As a cabinet-level executive agency under the State Council, Mofcom has 29 departments under current Commerce Minister Wang Wentao.
Is Mofcom the same as the US Department of Commerce?
On the surface, Mofcom appears to be the Chinese counterpart to the US Department of Commerce, as the two share some common functions, including addressing fair-trade issues, setting standards and promoting domestic and foreign commerce.
Mofcom also, to some extent, functions in a similar way as the Office of the US Trade Representative, being responsible for multilateral and bilateral trade negotiations as well as handling the relationship with the WTO on behalf of the Chinese government.
Citing increasing trade disputes after the 2008 global financial crisis, in 2010 the ministry established the position of China international trade representative – a minister-level appointee who also serves as the vice-minister of commerce. Former Chinese ambassador to the WTO, Yu Jianhua, currently holds the role.
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But it is the General Office of the Central Financial and Economic Affairs Commission, headed by Vice-Premier Liu He, which stands at the core of trade decisions in China.
Liu went on to meet new US Trade Representative Katherine Tai in late May 2021, before speaking with US Treasury Secretary Janet Yellen in early June.
What does Mofcom do in China?
“This new ministry actually has less power than any of its predecessors,” said Wang Zhongyu, then secretary general of the State Council in 2003, when Mofcom was formed.
Mofcom is responsible for boosting domestic consumption, promoting exports and imports, attracting foreign direct investment, managing outbound investment affairs and taking part in global economic governance.
But similar to its position in the trade-decision-making process, Mofcom has been widely seen as a relatively weak ministry in the Chinese political ecosystem, despite its large number of personnel and strong influence over industries.
It often overlaps with other ministries or commissions within the central government, sometimes even losing the dominant position during the internal division of labour.
It once had a fierce competition with the Ministry of Foreign Affairs over which body would control the outbound aid programme and which interests would take precedence.
And rather than formally operating under Mofcom, the office concerning the national security review on foreign investment is found within the National Development and Reform Commission, even though both agencies take the lead in the mechanism.
It was also a committee run by the Ministry of Finance, rather than Mofcom, that was responsible for announcing China’s additional tariffs on American products during the trade war.
It is in charge of compiling catalogues of prohibited and restricted import and export technologies; the negative list for foreign investment; and the unreliable entity list. It also executes blocking rules against the “unjustified extraterritorial application of foreign legislation and other measures”.
And it manages parts of China’s national strategic reserves, such as pork and filature silk.
Does Mofcom have a staffing problem?
Mofcom is one of the few cabinet-level agencies that publicly disclose a list of officials who resign, although the frequent personnel changes have drawn criticism from central authorities.
“The problem of officials outflows is serious; the grass-root level party building is not good,” said an inspection team from the Central Commission for Discipline Inspection in 2018.
Yang Jianhui, a former official with Mofcom’s Anti-Monopoly Bureau, joined Alibaba as a senior expert after leaving the ministry in 2016. Alibaba owns the South China Morning Post.
Cui Shufeng, another former official at the Anti-Monopoly Bureau, worked for both Tencent and Mobike as a senior executive responsible for government affairs after resigning from Mofcom in 2014.
Zeng Chen, a former official at the e-commerce department, joined JD.com as director of public strategy after resigning in 2016.
What is next for Mofcom?
It forecasts trade will grow 2 per cent annually, while it expects the total annual value of exports and imports to hit US$5.1 trillion by 2025.
But it will also scrutinise foreign-investment deals more closely over national security concerns.
