By Ma Jun, Yuan Dongming, Ma Yuan

Research Report Vol.20 No.6, 2018

A market-oriented, law-based international business environment is fundamental to high-quality development in China. It is conducive to stimulating the vitality of various market entities and ensuring the survival of the fittest products and businesses. In recent years, thanks to the consistent, comprehensive reforms to streamline administration, delegate powers, improve regulation, and strengthen services that have reshaped the relationship between the government and the market, China has increasingly improved its global ranking on the ease of doing business, and enterprises have become more satisfied with the streamlined administration and the convenient access to government services. At the same time, enterprises under the new conditions have also asked for a higher level of business environment, which urges us to intensify efforts to deepen the reform of our business environment.

I. China has made a Big Push to Improve the Business Environment and Lowered Various Government-imposed Transaction Costs

Over the past five years, China has made comprehensive moves in reforms of the business environment, and adopted effective measures in delivering more efficient government services and lowering institutional costs.

First, the property rights protection system has improved to give private enterprises more confidence. In November 2016, the Central Committee of the Communist Party of China (CPC) and the State Council co-issued the Opinions on Improving the Property Rights Protection System and Protecting Property Rights in Accordance with Law (the Opinions), and clearly put forward ten major tasks for an improved property rights protection system. All administrative departments and local governments have been working hard to put into practice the requirements according to the Opinions. In 2016, the Supreme People’s Court (the Court) published the Opinions on the Implementation of Properly Handling Long-Standing Property Rights Cases due to Historical Reasons in Accordance with Law. In 2017, the Court announced a retrial for three high-profile cases of Zhang Wenzhong, Gu Chujun, and Li Meilan concerning violation of property rights. In May 2018, the court quashed the guilty verdict against Zhang Wenzhong on charges of misappropriation, bribery and fraud in the original sentence. With the “Opinions” being put into practice, private enterprises are reassured and become more confident in sustained investment.

Second, the number of items subject to review and approval has been slashed to inspire the vitality of micro-entities. A series of reform measures have been taken to minimize the direct intervention of the government in market activities, including:

● Promoting the in-depth reforms of the business system. With regard to capital registration, the paid-in capital scheme is replaced with a pledged capital scheme. Enterprises are allowed to have their business licenses issued before getting administrative permits. Multiple certifications and licenses are integrated into one. The time it takes to start a business will also be substantially reduced, with the goal of getting it down to 8.5 days by the first half of 2019.

● Standardizing review and approval for business investment projects. The Catalogue of Investment Projects Subject to Verification by the Government (2016 Version) was published, where the items subject to review and approval were cut from 65 to 42. The Special Administrative Measures on Access to Foreign Investment (Negative List) was stipulated, where the restrictions were cut from 63 to 48.

● Reducing the requirements for professional qualification approval and accreditation. Seventy percent of the requirements, amounting to 434 items, were canceled in seven batches, and the items specified in the List of National Professional Qualifications were cut down to 140.

● Cutting back on the production licenses needed for industrial products. Licenses for 33 categories of products were cancelled at the national level, and the administrative licensing power for 12 categories of products was delegated. Currently, only 24 categories of products require licensing for production. Simplified deregistration procedures were rolled out for enterprises not officially put into operations or with no credit and debt records to minimize the materials required and speed up the announcement of corporate exits.

Third, measures to slash taxes and corporate fees have been sustained to reduce real economy costs. To ease the tax burden for enterprises, the State Council rolls out the targeted amount and steps for cutting taxes and corporate fees every year, which has also been continuously scaled up. The Report on the Work of the Government 2018 put forward the goal of reducing taxes of 800 billion yuan and non-tax fees of 300 billion yuan for various market entities in 2018. It is estimated that the actual amount will reach 130 billion yuan.

Fourth, compliance oversight has been strengthened to develop a credit-based incentive and disciplinary system. As the number of market entities was growing rapidly after the reforms to streamline administration and delegate powers, problems caused by the absence or overlapping of regulation regulator have become more prominent. Measures taken to improve regulation include:

● Introducing a new model of oversight combining randomly selected inspectors who inspect randomly selected entities and the prompt release of results to the public.

● Exploring consolidated regulation, which incorporates the business administration, quality inspection, food and medicine administration, price control, trademark and patent protection, and other functions, to pursue unified market regulation and integrated law enforcement, and to find a way to prevent enterprises from struggling with duplicate law enforcement and other problems.

● Exercising accommodative and prudential regulation, and issued the Statistical Classification of New Industries, New Business Forms, and New Business Models (Trial) and the Guiding Opinions on Promoting the Development of Sharing Economy, requesting for prudential introduction of new market access policies, dynamic regulation, and risk classification.

● Strengthening the joint credit-based incentive and disciplinary mechanism, and issued the Opinions on Accelerating the Establishment of Credit-Based Supervision, Warning, and Punishment Mechanisms for Credit Defaulters, which stipulated 37 joint penalties in 11 major categories, involving public office appointment, industry access, and consumption restriction.

Fifth, government services have been optimized to solve the complaints about the difficulty and complication of accessing government services. Measures taken to build a convenient and efficient public services system include:

● Creating an e-government platform that makes government services always accessible online, issuing a series of Internet Plus Government Services documents, and rolling out the reform program to build a one-stop service model that simplifies the online and offline service processes for people and enterprises. Specifically, people can search for related government services from the State Council’s website. Consultation, declaration, management, feedback and the like can all be carried out on the e-government platform regardless of users’ location. In the meantime, offline management of government services shall be concluded all at once, without the need for a second trip. At the end of 2019, 90 percent of provincial government services will be available online and 70 percent of the government services will be handled via the single window system.

● Clearing up unnecessary certificates required for individuals and enterprises when accessing government services, and issuing the Guiding Opinions on Optimizing Government Services Subject to Review and Approval for the Convenience of the People and the Notice on the Cancellation of Unnecessary Certificates for Access to Government Services, and requiring that the certificates set by administrative departments and local governments must be canceled by the end of 2018.

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