Fact Check
Improving the domestic market's efficiency
By Lan Xinzhen  ·  2023-06-16  ·   Source: NO.25 JUNE 22, 2023



In April 2022, the Communist Party of China Central Committee and the State Council, China's cabinet, jointly released a guideline on accelerating the establishment of a unified national market. This document called for standardization and consistency in the implementation of regulations across a wide range of industries in China. Although the Chinese market is one of the biggest in the world, it remains relatively inefficient or, as stated in the guideline, it needs to "transition from being big to being strong." Prominent problems such as local protectionism and market fragmentation must be tackled.

The past 12 months have seen the early stages of a more unified national market taking shape. Local policies hampering market unification have been removed through self-assessment. Special actions have been taken to target problems in areas such as market entry and exit, project tendering and bidding, and government procurement, or the procurement of goods and services on behalf of a public authority, such as a government agency. The government has also established a list of behaviors categorized as "improper market intervention," together with a mechanism to rapidly respond to any related problems reported by business entities.

Focusing on fundamental market systems, market connectivity, resource markets, goods and services markets, and market regulation, China is accelerating the formulation of laws and regulations to ensure fair competition and the protection of consumer rights. The country is also continuously modifying its negative list for market access.

The list delineates industries where investment is prohibited or restricted. The 2022 list covered 117 industries, down from 123 on the 2020 list. Another negative list, which specifies restrictive measures exclusively applied to foreign investment, covered 31 industries in 2022, down from 93 in 2017.

A unified national market will also become a key driving force as China pursues a double development dynamic. Also known as "dual circulation," the strategy reorients the country's economy by prioritizing the domestic market (domestic circulation) while remaining open to international trade and investment (international circulation).

Leaving the door open and opening it wider are important given that the country's overall attractiveness is on the rise. For decades, foreign investment has disproportionately flowed to the coastal regions in east China, but thanks to the push for a nationwide unified market, the Chinese market overall is becoming more attractive. The country's central and western regions, in particular, have seen a rise in paid-in foreign investment.

In recent years, the leading role of open platforms has been brought into full play, with prime examples being the construction of a high-level free trade port in the southern island province of Hainan, the creation of national comprehensive demonstration zones for expanding opening up in the service sector in 11 cities including Beijing and Shanghai, as well as a range of state-level economic and technological development zones nationwide.

As the Chinese market is becoming more open and fairer, government regulation has been streamlined. Steps such as amending unfair competition laws have been taken to consolidate the systems that ensure business entities of various kinds can equally participate in market competition. Behaviors that hinder the free circulation of commercial resources will be penalized.

A unified national market cannot be achieved overnight and China still has many hurdles to overcome. Plus, the vast Chinese market is yet to make effective use of global resources. The country still has a lot of work to do in terms of playing a bigger role in global industrial, supply and innovation chains, and better safeguarding economic globalization and multilateral trade. But from company to country, team unity is important for growth.

(Print Edition Title: Unity makes strength)

Copyedited by Elsbeth van Paridon 

Comments to lanxinzhen@cicgamericas.com 

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