Greater role for the market

Reform of the government examination and approval system will facilitate economic vitality and help increase transparency

For foreign investors, doing business in China has required completing quite a lot of approval procedures, as these were a necessity for China-foreign cooperative projects. But thanks to China's recent move to accelerate streamlining the government approval items, many of those procedures have been abolished.

Among the latest batch of adjusted administrative approval items announced in July are those concerning foreign cooperation in the oil, natural gas and coalbed gas sectors, and the hiring of principals at schools jointly run by domestic and foreign partners, all of which no longer require approval.

They are only a small part of the 632 approval items that have been eliminated or transferred to lower-level governments over the last year or so. These adjustments will greatly facilitate people launching or operating a business in China. For example, after the changes, the number of investment projects that require approval from the central government ministries was reduced by up to 60 percent.

Administrative examination and approval items often involve permits that people have to get from relevant government departments before they launch a business. China has been opening-up its market to all types of investors in the past three decades and continually liberalizing its economy. But as a transitional economy born of a rigid planned-economy regime, China still has a large number of approval procedures in place, which have led to public complaints and corruption.

For instance, many people have complained that procedures to get a permit to start up a business are too complicated due to the excessive red tape that exists in the regulatory agencies.

In other words, the government has been too involved in many areas where the market is supposed to play the leading role. To make the government more efficient and prevent it from intervening in the market, administrative reform, which is centered on cutting approval power, is indispensable.

China started administrative reform many years ago, but it is only in recent years, especially since early last year, that the reform drive has accelerated.

During the National People's Congress session in March, legislators passed a plan on institutional reform and the transformation of administrative functions. It marks a solid legal step by Chinese policymakers to put an end to administrative approval procedures for certain investment activities, business registration and occupational certification.