In March, the date of the meeting of the Chinese parliament, the National People's Congress, China will launch its largest administrative reform since 1998. Back then, the number of ministries went from 70 to 44 - and today the 44 are expected to be halved and competences will be redistributed.

It is a further step away from the legacy of Leninist state administration, but more importantly it signals a new phase of political restructuring and could open a complex resolution of the long power struggle in China. A recent stand-off about the popular newspaper Southern Weekly is proof of how complicated the situation now is.

No detail is clear and set in stone yet, but something like the following could happen. The Ministry of Railways, which for 15 years managed to avoid incorporation into the Ministry of Transport, will be abolished, while the Ministries of Civil Affairs, Labor, and perhaps even of Health will be merged into one.

The powerful Ministry of National Security, a sort of CIA and FBI created decades ago as a Chinese version of the Soviet KGB, will be degraded at least officially (but forms count).

The Ministry of the Environment is expected expand its powers, thanks to many years of cooperation with foreign countries that in turn have promoted its role internationally and domestically.

Likely to merge are the Academy of Science and the Academy of Social Sciences, which today play very different roles; one is a research center of science and technology and the other is a kind of super think tank for the government.

The powerful Commission for the Economy and Reform, which is now a super Ministry of Economy and Industry, could disappear then reappear as a commission for reform, with tasks including administrative restructuring of the state.

The Central Bank, now a kind of technical body under the supervision of a deputy prime minister, should be promoted in rank and earning power.

In addition, the bloated state-owned enterprises, which until recently had expanded their areas of interest and taken everything they could get their hands on, will face more pressure to focus on their core businesses. This should create more opportunities for private companies.

It is a huge tectonic shift that should create greater efficiency for the state and the market, but will also create an army of malcontents. In fact, this restructuring, to be announced at the end of the plenary session of China's parliament (the NPC) in mid-March, will mean a strong blow to the bureaucracy, which could be left with half its former number of seats, as ministries will be halved.

Just 15 years ago, when China dramatically cut back its bureaucracy under then-president Jiang Zemin, the situation was very different.

In 1998, Beijing had a sense of anxiety about the inefficiency of the entire apparatus of the state, starting with state-owned enterprises. There was a sense of siege and a pressing need for action when the Asian financial crisis put Beijing in danger of collapse. Meanwhile, the United States and the West seemed invincible and strong, having recently defeated the USSR.

Today all that has changed. The US and Europe are still concentrating on how to get out of the 2008 financial crisis. Asia has been the locomotive of growth in recent years, and due to their many privileges, the state-owned enterprises are full of money. In theory, then, China doesn't need to change anything and could continue with the old formula.

In fact, the current leadership sees problems in the current system and wants to avoid bubbles of inefficiency that may expand and burst over five or 10 years. Already, the relatively inefficient state-owned enterprises (SOEs) are closing off the market to all but the themselves, and many ministries have no clear boundaries, which expands the bureaucracy and wastes time.

In reality, then, the pending reforms are advance preparation, carried out cold and with no alarm or terror, and it is a test of how the Chinese ruling class can dominate the domestic situation and the state apparatus - a much greater challenge than in the past, when the reforms were "forced" by the external environment.

Moreover, these reforms take place at a strange moment of transfer of power. In late March, President Hu Jintao and Premier Wen Jiabao will give up their seats to Xi Jinping and Li Keqiang, respectively, but the changes underway are designed and driven jointly by the outgoing and incoming teams.

This is very different from 1998. Then, Jiang was able to push reforms that were firmly in his power, and the previous management team was physically out of the picture: Deng Xiaoping died in 1997, and most of his comrades in arms also departed the political scene.

Furthermore, in recent speeches Xi proved willing to continue and expand the changes, and various signals increasingly suggest the possibility of political reforms.

Xi seems determined to build the "Chinese Dream" (like the American one), which is a dream of prosperity for the Chinese and peaceful development for China and the world, as party theorist Zheng Bijian explained in recent speeches.

To create his Chinese dream, Xi, supported by Hu, needs a lot of power and a lot of determination because interest groups opposed to reforms are very powerful. Bo Xilai, now coming to represent the total of conservative forces in China, has been defeated, but many of his former supporters are still defending his ideas and their interest turf, the old ministries and cash-rich SOEs. In mid-March we'll see if and to what extent the desire for change progresses.

In the meantime the situation is far from clear. The difficulty in handling a stand-off about official censorship in the most liberal Chinese newspaper, the Southern Weekly, whose editors went on strike last week against a heavy-handed intervention, proves the present difficulties.

Beijing needs to bring the Southern Weekly into the fold and gain the consensus of the journalists but also it can't afford at this moment to forfeit all of its tools of control over the media. But attaining these delicate goals could prove difficult while the most liberal leaders push for faster reforms and the conservatives point at the strike as evidence that things are getting out of control and the present leadership may be losing its foothold. This is a special test for Xi but also for newly appointed Guangdong Party chief Hu Chunhua, expected to become China's president in 2022.

Beijing has to regain quickly full control of the situation otherwise the plans for administrative reforms could be disrupted. One way seems to be the old tactic of diverting attention. On Thursday, the official Xinhua news agency announced that the case of former Chongqing Party chief Bo Xilai "has been transferred to judicial organs"; therefore his trial could be held in February before the opening of the NPC.

This could focus attention internally, showing that the real challenge to the present leadership comes from the conservatives, and that the liberals should not push too hard for fear of rocking the boat. In the meantime the trial could be also a warning shot against those who oppose reforms, as their destiny could be in jeopardy if they choose to associate closely to Bo's old agenda.

It is a delicate balance act where Hu Jintao and Xi Jinping are working apparently closely together to define the political direction of China for the next 20 years. (2013-01-11 Asia Times)