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Special> NPC & CPPCC Sessions 2015> Exclusive
UPDATED: March 8, 2015 NO. 11 MARCH 12, 2015
The Hands-Off Approach
Large strides have been made to shift the government more from an authoritative entity to a supervisory presence
By Zhou Xiaoyan

By virtue of the new policy, the number of newly registered companies reached 3.23 million during the March-December period in 2014, surging 48.76 percent year on year. Registered capital reached 17.07 trillion yuan ($2.72 trillion), up 97.09 percent year on year, according to data from the SAIC.

"Previously, over 150 approval items had to be cleared before a business license was granted. Now, some of the approval items have been canceled, while some are still required after a business license is granted to a company," said Zhang Mao, Minister of the SAIC.

"A looser market entry should be combined with stricter post-establishment supervision, while supervision should mainly rely on credit instead of the daily inspections of SAIC staff. A broader supervision network includes the self-discipline of businesses, industry self-regulation, social supervision, media supervision and finally government supervision," Zhang said.

More to do

Chi Fulin, President of CIRD, however, said that local governments may still resist.

"Now that the Central Government has set the tone for delegating more power to the market, the most difficult part lies in the competitive development pattern of local governments. Under the pattern, local governments compete with each other in areas such as GDP growth rate and the volume of projects and investment, meaning the government supplants businesses as the major market entity in local economies," Chi said. "In order to change that kind of mindset, fiscal reform should be carried out and assessment of the upper echelons of local leadership should not be based on GDP data."

Chi also said cutting red tape is by no means the end of the story. "The government should intensify present- and post-establishment supervision accordingly," he said.

"Currently, there is considerable overlap between the administrative approval system and market supervision system, and some government departments use administrative approval to replace post-establishment supervision," Chi said. "In the modern market economy, administrative approval and market supervision are two totally different things. Pre-establishment administrative approval involves the power of the government, which requires the law to be explicitly definitive, while post-establishment supervision should be based on the rule of law."

"Therefore, China should change its current administration-based supervision to law-based supervision in order to reconstruct the market supervision system," Chi suggested.

According to Chi, the new supervision system requires the government to do four things. "First, a negative list, which defines areas off-limits to businesses, should be formulated to increase transparency and fully unleash the latent potential of businesses. Anything that's not on the negative list should automatically pass, and government energy will be better spent on strengthening post-establishment supervision," Chi said.

"Second, a comprehensive market supervisory authority should be brought into being. Third, in the modern market economy, the government alone is not able to deal with a countless number of market entities. Therefore, the government should make full use of industrial associations and the supervisory power of the general public. Finally, a legal framework on market supervision should be established, such as making the negative list part of the law."

"Streamlining administration represents the biggest challenge to the government," said Shi Jun, Deputy Director of the Economic Committee of the 12th National Committee of the CPPCC.

"The goal of giving the power back to the market cannot be accomplished in one fell swoop. It's a long-term and arduous responsibility. What has been ceded is not only administrative power but also interests behind the approval power. That's a real challenge for governments at all levels," Shi said.

Email us at: zhouxiaoyan@bjreview.com

Measures to Streamline Government Administration in 2014

January 8: The State Council released its 1,235 approval items online to receive public supervision.

March 5: When delivering the government work report to lawmakers at the opening of the Second Session of the 12th National People's Congress (NPC), Premier Li Keqiang said the State Council plans to cancel or decentralize more than 200 administrative approvals before the end of 2014 to unleash more market freedom.

June 4: A State Council executive meeting released measures to promote employment by streamlining government administration, resulting in the cancelation and delegation of 52 administrative approval items.

August 19: A State Council executive meeting disclosed 87 approval items will be canceled or delegated to lower-level governments. The meeting said streamlining administration, combined with strengthened present- and post-establishment supervision, will greatly increase the viability of businesses.

December 12: A decision was made at a State Council executive meeting to cancel and decentralize 108 approval items in such fields as investment, business management and employment. The meeting said streamlining government administration is an arduous and long-term task.

(Compiled by Beijing Review)

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