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APEC DEREGULATION REPORT 2000 - CHINA

APEC Deregulation Report 2000

China

1. Current Position
   

To keep a rapid and steady economic growth, China will give full play to the role

of market mechanism, as well as strengthen and improve the macroeconomic control. On the one hand, the role of market forces that serve as the basic means

of regulating the allocation of resources should be fully exerted for the

development of socialist market economy, otherwise economic development will lose its dynamism. On the other hand, market has its own limitations that need

administration and guidance through macroeconomic control by government, otherwise economy will be in chaos. The macroeconomic control under market economy, which is different from government’s direct interference in the operation

of enterprises under the planned economic system, is to make a rational regulation on national economy in accordance with the discipline of market

economy combined with economic, legal and supporting administrative measures.

China considers that a developing economy should maintain a balance among reform, development and stability. Reform, the motive force of development, should aim at promoting social and economic development and raising people’s living standards. China will press ahead reform in various fields, resolve the

conspicuous issues in the social and economic development. Development is the

objective of reform, as well as the guarantee of stability. The key to the solution of

all China's problems lies in our own development. China will promote the

fundamental shift of the economic system and of the mode of economic growth, improve the quality and effectiveness of economic growth. Stability is the prerequisite of reform and development. China will promote reform and development on the basis of social and political stability and achieve social and political stability in the process of reform and development. China will pay

attention to harmonization and unification of the intensity of reform, the speed of development and social ability to sustain them so as to advance amid stability.

In recent years, great breakthroughs have been made in the reform aiming at establishing a socialist market economy. The framework of a new

macroeconomic control system was preliminarily established, and market forces notably served as the basic means of regulating the allocation of resources.

China took big strides in reforming the systems of public finance, taxation,

banking, foreign exchange, planning, pricing, investment, and financing etc. The mode of planned control with directive planning as the base is improved, the control on price is further relaxed. The prices of consuming products and raw materials are mostly determined by market. Market mechanism plays a more active role in increasing supply, adjusting demand and raising welfare. Reform

was undertaken in the fields of investment and financing through putting into

effect the new effective system such as bidding with a view to strengthening the

control of risk in investment and further widening channels of financing for enterprises. China redoubled its efforts in reforming the state-owned enterprises

and pressed forward on the basis of making experiments in selected ones. China further developed the pattern with the public sector remaining dominant and

diverse sectors of the economy developing side by side. The national economy is

further market-oriented and socialized. Deepening reform continued to put new vitality into national economy and social development.

China has recently taken the following measures in deregulation and regulatory reform:

Ÿ Foreign investment

In accordance with the revised Catalogue for the Guidance of Foreign Investment

Industries, most industries in China are now open to foreign investment in addition to a few categorized as prohibited. China relaxed the conditions for

market access in service areas such as financial services, commercial retailing, energy, transportation and tourism. Pilot programs are being actively explored for further deregulation.

Ÿ Foreign Trade

China expanded the pilot scope of trading right registration system for production enterprises and will gradually adopt complete registration system. From 1

January 1999, private production enterprises and scientific institutes were

granted trading rights. They enjoyed the same treatments with state-own production enterprises and scientific institutes.

China continued to improve tendering of export quota and broke the traditional quota distribution system. On 1 April 1998, 26 commodities were exempted from export quota and licensing administration. The scope of tendering was expanded

to 37 commodities. Especially with regard to textile quotas, its tendering scope

was expanded from 7 commodities to 21.

Ÿ Telecommunication Services

Before 1993, China’s telecommunication services, including basic and value- added telecommunication services, are all operated and administrated by China's postal and telecommunication enterprises. Since 1993, China has granted domestic enterprises the right to operate nine value-added telecommunication services: radio paging service, 800MHz trunked telephone service, 450MHz wireless mobile communications, VSAT, telephone information service, computer information service, electronic mailbox service, electronic data exchange service, etc.

In 1994, China Unicom Corporation was established and permitted to engage in some basic telecommunication services -- such as long-distance phone, local phone service- and value-added telecommunication services. It marked that

China further introduced a competitive mechanism into its telecommunication service.

In 1998, as the result of central government restructuring, the Ministry of Information Industry was formed which undertook to separate enterprises from government body, strengthen the enforcement of laws and regulations and administration of information industry.

Ÿ Financial Services

In 1995, China promulgated the People’s Bank Law and the Commercial Bank

Law which strengthened the status of the People’s Bank as the central bank and provided legal framework for improving its surveillance on commercial banks. Interim Provisions Governing Open market Business and First-class Dealers, promulgated by the People’s Bank of China, standardized open market business established and perfected the system on open market business and first-class dealers.

From 1992 China began to open its insurance market conditionally, allowing foreign insurance institutions to establish their branches and/or Chinese-foreign joint venture insurance companies in the designated cities of Shanghai and Guangzhou.

In 1997, the Securities Committee of the State Council published Interim Provisions Governing Convertible Company Bonds that opened the convertible company bond market. In 1997, the Securities Committee of the State Council promulgated Interim Provisions on Funds Investment in Securities that

contributed to the regular development of investors in security market institutions

and protected the legitimate rights and interests of the parties to the funds. On 1

July 1999, the Securities Law entered into force which provided a systemized legal framework for China’s securities market.

Since 1997, China has begun to establish a financial system in compliance with the socialist market economy. In 1998, the People’ Bank completed its administrative reform and established separate governing bodies for banking, insurance and securities sectors. In 1999, China improved its financial surveillance system and implement the plan for rectifying all kinds of financial institutions adopted by the State Council with a view to reducing financial risks

and promoting healthy development of financial market.

Ÿ Professional Services

Legal services: In December 1993, the State Council approved and promulgated

“The Plan of the Ministry of Justice for Deepening the Reform of Bar System”.

Since then, China began to set up its own bar system with Chinese characteristics that adapted to the needs of socialist market economy and

international exchange. The principles of voluntary organization, self-debiting and crediting, independent development, and self-regulating are applied in the new system. “The Law of the Bar of the People’s Republic of China” which entered

into force on 1 January 1997 further consolidated the administrative system on lawyer that combined the administration of relevant enforcement authorities with profession administration of the lawyer’s association.

Accounting services: Foreign Accounting Firms could establish representative

office in China and accept Chinese firms as their members. China's CPA examination is open to non-Chinese candidates. After passing the CPA examination, non-Chinese candidates are qualified to operate in China.

Construction services: Since 1992, China has promulgated a series of regulations

governing its domestic construction market. China’s construction services have also been gradually opened to foreign investment.

Tourism: Foreign investors could establish equity or contractual joint ventures to build or operate hotels and restaurants. Foreign travel companies are allowed to establish joint venture travel companies in China and operate entry travel and domestic travel services.

Ÿ Transportation

“ The Administrative Measures for International Freight Forwarding of the

People’s Republic of China” issued in 1995 opened the operation of freight

forwarding to foreigners conditionally and made the administrative system more transparent and regular.

“Provisions Governing the Paid Transfer of the Business Right to Operate Transportation on Highways” published in 1996 opened the non-gratuitious transfer of road operational rights under certain conditions.

1. Objective
   

Short and Medium Term (2000-2010)

Ÿ Trade and Investment

With respect to reforming the foreign trade regime, China will gradually adopt the complete registration system for trading rights based on the expanded

pilot of granting production enterprises the trading rights. China will deepen

the reform of its import and export regime, especially the work for tendering of export quotas.

Ÿ Telecommunications Sector

1. Optimize the structure of telecom enterprises, carry out the planned reform and restructuring of China Telecom with a view to gradually creating the situation for fair competition;
2. Adopt the APEC MRA on telecommunication equipment and achieve the recognition of testing reports for telecom terminal equipment by 2002;
3. Facilitate the legislative process for telecom. The Telecommunications Law

has been enlisted in the national legislative plan. Before the adoption of that law, the Regulation on Administration of Telecommunications Industry will be enacted;

1. The framework agreement was reached between Chinese and American enterprises to allow set-up of a Chinese-foreign joint venture operating

value-added telecom services in Shanghai's Pudong New Area. This agreement will enter into force upon the approval by the government. China

will gradually open its telecommunications market to foreign investment after its accession to the WTO.

Ÿ Financial Sector

Establish a unified and transparent currency market, regulate the inter-bank call-money businesses of all kinds of financial institutions, basically open the interest rate of inter-bank business. Establish the open market business for

national debts in central bank, reform the required reserve system for deposit, continue to introduce the management on the ratio of assets and liabilities and risk management. The departments such as banking, trust, insurance, and securities will operate and be administrated independently with a view to improving the financial legislation and prevent serious systematic financial risks.

Ÿ Professional Services

Legal services: China will press ahead the openness of its legal services through active, rational and effective measures, legalize the procedure of approving foreign law firms.

Ÿ Transportation sector

In addition to national and large- or medium-sized transporting infrastructure projects, the procedure for examination and assessment of the projects directly governed by the Ministry of Communication will be simplified.

Long-term (2011-2020)

Ÿ Replace the approval system with registration system for granting trading rights gradually within 5 years after China’s accession to the WTO.

Ÿ Further review and liberalize regulations on trade and investment and make efforts to eliminate the barriers to trade and investment development.

The role of market mechanism will be played in more areas through deepening the reform. Those economic activities that should be regulated by the market force will be further liberalized. The resources for competitive industries will be allocated by market. Competitive mechanism will be introduced into the

infrastructure industries so as to make the economy more dynamic and efficient.