New guideline to supervise horizontal competition

Date Sep 03 2013 08:51:10

The China Securities Regulatory Commission and State-owned Assets Supervision and Administration Commission released a guideline on Friday to supervise horizontal competition between State-owned companies and their public holding firms.

Horizontal competition refers to bodies involved in the same sector or sharing the same interests.

The document aims to regulate transactions and clarify the relationship between the two, according to the commissions.

It requires State-owned companies to provide specific plans to solve the problems regarding horizontal competition and clarify business scopes and boundaries, based on different development situations.


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New rules to regulate local government spending

Date Aug 23 2013 08:22:28

BEIJING -- The Chinese Finance Ministry Wednesday ordered all government bodies at or above county level to make public their budgets and final accounts reports by 2015. 

They should also release their budgets and expenditures on the use of public funds for receptions, vehicles and overseas trips, also known as "the three public consumptions," the ministry said. 

The move comes as China vowed to cut administrative costs for governments as well as curb extravagance and corruption. 

Public institutions, social organizations and companies using fiscal funds allocated by authorities at or above county level should also unveil their spending on the three items, said the ministry. 

China's State Council has required provincial-level governments to disclose information on "the three public consumptions" by 2013.

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State Council cuts approval procedures

Date Aug 23 2013 08:21:59

Central government move aims to curb abuse of power by local officials

The central government announced on Wednesday a housekeeping move that will reduce the number of administrative procedures and streamline approval processes at all levels of government.

According to a statement by the State Council, the move will further boost reforms in the structure of governments and remove government hindrances on enterprises.

The State Council, led by Premier Li Keqiang, who took office in March, has been striving to curb the misuse of power by local authorities and has abolished a long list of approval requirements as well as government-issued awards.

Strict standards must be used in setting new approval requirements for investments by enterprises, for products, and for qualification processes, according to the Wednesday statement released after a State Council meeting presided over by the premier.

Authorities should also not set approval requirements in industries where a market can properly govern itself.

Approval requirements should not be placed if the issues can be solved through adjustment of technical standards or industrial policies, the statement said.

It also added that private capital should be given more access to sectors that are tightly controlled by the government or State-owned companies.

If it is necessary to create a new approval requirement, the local government must check if it is legitimate, necessary, reasonable and has already solicited the public's opinion.

The statement said public hearings must represent "the true voices of the people and avoid being rubber stamps for officials".

Government departments should periodically assess public approval procedures and revise or abolish outdated ones.

The State Council asked that authorities at all levels to strengthen their management and supervision of approval procedures.

It said unnecessary approval requirements disguised as registrations, annual tests or instructions must be rectified.

Authorities are also forbidden to create new claims for the establishment of approval procedures.

The State Council also canceled 76 awards set by government departments.

Wu Hui, an associate professor of governance at the Party School of the Communist Party of China Central Committee, said the measures to control authorities' power shows the central government's determination to deepen structural reforms.

"(Li) is fully aware that the government's duty is to serve the public and enterprises and should never govern beyond its power," he said.

"The more power authorities have, the more likely they will use it to pursue interests for themselves."

Wu said the ultimate solution is to enhance supervision and scrutiny through the People's Congress and with the public's help.

Edited by SHMET

Legal framework taking shape for Shanghai FTZ

Date Aug 21 2013 08:44:23

It's first step to set up a new financial architecture as the country pursues a new round of reform

An executive meeting of the State Council said that a draft plan to suspend certain laws in the Shanghai Free Trade Zone will be submitted for the approval of the National People's Congress.

The measure was expected to ease the administrative approval procedures for foreign investment. It's also a first step in setting up a new financial architecture as the country pursues a round of economic reform.

According to the Friday meeting, the FTZ will explore an innovative "blacklist" management system, which only regulate the forbidden areas and all the rest will be open for investors, in a bid to improve the efficiency of investment.

The establishment of the Shanghai FTZ was approved by the council on July 3, although no detailed plans have been announced yet.

The central government has delayed the announcement of new rules as government lawyers attempt to close potential legal loopholes, the South China Morning Post reported on Aug 5, citing unidentified government sources.

According to He Jun, a researcher with Anbound Consulting, disagreements between the Shanghai government and relevant ministries involve "dozens" of areas. These include the opening up of the service sector, reduced administrative approvals and reform of financial and tax policies.

"The biggest challenge for the legal remit in the Shanghai FTZ is with yuan reform. But the impact of such reform, the yuan's full convertibility and further opening up of the capital account will not be limited to one region," said He.

He said concern that financial reforms could "get out of hand" may be weakening decisionmakers' determination and thus interfering with the effect of the new policies.

Kenneth Leung, partner of tax and business advisory with Ernst & Young, said he expected that the Shanghai FTZ would be at the forefront of broad-ranging reform.

"There are many special areas in China, each with different functions and favorable policies. All these measures can be copied for the Shanghai FTZ," he said.

He suggested that recent tax incentives in Shenzhen's Qianhai, which said local high-end talent would only have to pay a 15 percent personal income tax, a similar level to Hong Kong, can be implemented in the Shanghai FTZ.

He went on to say that the value-added tax could also be eliminated in the Shanghai FTZ, which would be comparable with Hong Kong.

"This will create a miniature Hong Kong," he added.

However, Shanghai still lags far behind Hong Kong in many aspects. For example, to set up a company in is still very much more complicated than in Hong Kong.

According to a lawyer with a United States-based law firm, who specializes in facilitating foreign investment in China, setting up a foreign joint venture in the Chinese mainland would take two to four months, while in Hong Kong it only takes one week.

"In the meantime, the lower level of flexibility in foreign exchange in the mainland requires overseas companies to maintain a certain amount of capital within the borders, whereas in Hong Kong you can move in or out your capital anytime," the lawyer said.

"Many parts of the foreign investment laws, passed in the 1980s, are obsolete. But it is a complex procedure to amend the laws," said Ge Shunqi, deputy head of the Institute of International Economics at Nankai University in Tianjin.

The pilot Shanghai FTZ offers an avenue for China to amend these obsolete laws and eliminate barriers for further opening-up, Ge said.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a government think tank, said that further opening-up lies in easing the market access of foreign investment as well as facilitating the management.

"As for manufacturing, the catalogue for encouraged industries is subject to further expansion, while easing access to high-end manufacturing and strategic emerging industries will bring in new capital.

"The administration as well as approvals should be simplified. In addition, practical moves should be introduced to support foreign investment in the service sector," Huo said.

Last year, FDI in China declined 3.7 percent to $111.7 billion from a record $116 billion in 2011, according to the Ministry of Commerce. Investment increased 4.9 percent in the first half of this year to $62 billion.

"The key issue in the near future is not expanding FDI but diverting the spending into high-end and high value-added industries," Huo said.


Edited by SHMET

China to launch fresh pharm bribery probe

Date Aug 15 2013 17:24:14
Aug.15,2013(SHMET)--SHANGHAI - China is intensifying its investigation into rampant bribery in the pharmaceutical and medical services sector with a fresh three-month probe slated to begin on Thursday, the official Xinhua news agency reported. 

The probe by the State Administration for Industry and Commerce (SAIC), one of China's anti-trust regulators, is aimed at stamping out bribery, fraud and other anti-competitive business practices in various sectors, Xinhua said on Wednesday.

"Commercial bribery not only leads to artificially high prices, it undermines market order in terms of fair competition and corrupts social morals and professionalism," the report said.

The SAIC will hand down severe punishment for bribery in the bidding process for drugs and medical services as this hurts the interests of the Chinese people, it said.

The National Development and Reform Commission (NDRC) is already investigating 60 foreign and local pharmaceutical firms over pricing. This investigation has yet to conclude.

Separately, Chinese police have accused drugmaker GlaxoSmithKline of bribery. The British company has said some of its senior Chinese executives appear to have broken the law.

Health authorities are also investigating drugmaker Sanofi SA over bribery allegations, something the French company has said it was taking "very seriously".

The SAIC investigation will also look into misleading or deceptive marketing practices used by car dealers, placement agencies and real estate agents among others, the Xinhua report added.

The SAIC is one of China's anti-trust regulators in charge of market supervision. It also looks into bribery cases.

Other sectors affected by the NDRC's pricing probes include milk powder, jewellery and autos.

Edited by SHMET