Setting up a Business in China
By Jing Zhang
From a start of introducing the licenses to figure out the reason why enterprises need go through the complex procedures of setting up a business in China, we know that license system reflects Chinese characters and different licenses are issued by several ministries and bureaus. In Section 4, we will introduce these ministries and bureaus as well as their functions. The reasons that cause complex procedures with extensive time are also discussed from the perspective of the bureaucracy in China.
Ministries and Bureaus
The licenses are issued by several ministries and bureaus because the different functions and duties of each ministry and bureau and the different assigned authorities and tasks by the Central Government. Each ministry or bureau has its own procedure standard and time consumption to deal with affairs.
Ministries and bureaus generally involved in the procedure of setting up a business are listed below.
n The State Administration of Taxation and Local Tax Bureau (Tax Bureau)
n National Bureau of Statistics of China and Local Statistics Bureau (Statistics Bureau)
Introduction of the Listed Ministries and Bureaus Above
SAIC is the competent authority of ministerial level directly under the State Council in charge of market supervision/regulation and related law enforcement through administrative means. With creating a regulated and harmonized market environment of fairness, justice and faithfulness for the coordinated socioeconomic development as its objective, SAIC functions in maintaining market order and protecting the legitimate rights and interests of businesses and consumers by carrying out regulations in the fields of enterprise registration, competition, consumer protection, trademark protection and combating economic illegalities. SAIC also takes charge in business coordination among local Administrations for Industry and Commerce (AICs) at/below provincial level nationwide, and gives relevant guidance thereof. For the detailed missions, please click the link.
MOFCOM, formerly Ministry of Foreign Trade and Economic Co-operation (MOFTEC) is an executive agency of the State Council of China. It is responsible for formulating policy on foreign trade, export and import regulations, foreign direct investments, consumer protection, market competition and negotiating bilateral and multilateral trade agreements. For the detailed missions, please click the link.
AQSIQ is a ministerial-level department under the State Council of the People's Republic of China that is in charge of national quality, metrology, entry-exit commodity inspection, entry-exit health quarantine, entry-exit animal and plant quarantine, import-export food safety, certification and accreditation, standardization, as well as administrative law enforcement. AQSIQ directly administers provincial Entry-Exit Inspection and Quarantine Bureaus and Bureaus of Quality and Technical Supervision. For the detailed contents and functions, please click the link.
MPS is a functional organization under the State Council in charge of public security work nationwide. Public security departments are set in provinces and autonomous regions; metropolitan public security bureaus are set in direct municipalities; public security bureaus or divisions are assigned to cities and prefectures; sub-bureaus are set in sub-regions of cities, under the direct leadership of their superior public security agencies; public security bureaus are set in counties and banners, under the leadership of their respective local government and superior public security agencies. Dispatched police stations are directly subordinate to their superior public security bureaus and sub-bureaus in counties and banners. Responsibilities of public security agencies in China can be found in the official website.
China's tax authorities are the departments in charge of the tax collection and administration. The State Administration of Taxation (SAT) was established at the central government level as an organization directly under the State Council in charge of the taxation work. The state tax bureau system and the local tax bureau system were respectively established for the tax authorities at the provincial level and below. The state (local) tax bureaus are established in accordance with the law, and uniformly called the offices of SAT or local tax bureaus, tax branches, tax stations, and inspection offices of the offices of SAT or local tax bureaus; the names and responsibilities of the tax authorities are determined in accordance with the administrative tier, administrative (economic) division or affiliation. For more detailed tax information, please click the link.
SAFE is an administrative agency tasked with drafting rules and regulations governing foreign exchange market activities, and managing the state foreign exchange reserves. The parent agency is People’s Bank of China (PBC or PBOC), which is the central bank of the People's Republic of China with the power to control monetary policy and regulate financial institutions in mainland China. For the major functions, please see the official website –About SAFE – Major Functions.
Ministry of Finance of the People's Republic of China is the national executive agency of the Central People's Government which administers macroeconomic policies and the national annual budget. The main functions include economic and public finance policies, administration of public finance and external debt, annual budget for Central People's Government, revenue and tax legislation reforms, Central People's Government expenditure, Government revenue distribution, economic development expenditure, social security expenditure, domestic government debts, accounting regulations, Fiscal and Tax Policies, Fiscal research and education and other duties as directed. Here is the link of the official website of Ministry of Finance of the People's Republic of China.
Please click the link to see the functions and organizational structure of the National Bureau of Statistics.
The dispersion of authorities’ distribution are caused by some unreasonable factors which the government structure brings. Next, we will discuss about the reasons of the complex procedures and extensive time consumption of setting up a business in China from the perspective of the China bureaucracy.
The bureaucracy of the People's Republic of China is organized along territorial and functional lines. The State Council of the People’s Republic of China, namely the Central People’s Government, is the highest executive organ of state power, as well as the highest organ of state administration. It’s obvious that the government still wields tremendous control over what happens in the economy and what private companies can and cannot do. This is a function of China’s heralded “state capitalism”.
The territorial lines mainly include Central People’s Government, Provincial Government and Municipal Government. Except the highest executive organ, Central Government, the government hierarchy includes four level administrative subdivisions, which are first-level administrative subdivision (province level), prefectural level cities, country level cities and towns. The government hierarchy and regionalism is shown in Appendix A. There are 34 first-level administrative subdivisions, which include 23 provinces (if Taiwan included), 4 municipalities, 5 autonomous regions, and 2 special administrative regions. The map is shown in Appendix B.
The functional lines are based on various ministries and departments. State Council Organization Chart and links of the ministries and bureaus can be found on the official website of State Council of the People’s Republic of China.
The problems such as overlapping responsibilities and divergent functions of the authorities exist in China for a long time. The inefficiency of the government solving problems are resulted from the overlapping functions and the extensive use of authorities as well as the fuzzy responsibilities of the bureaucracy to a great extent. In addition, the unclear boundary between state and market reduces the efficiency of economics as well.
These problems bring government officials an opportunity to show their humanity and human weaknesses. In order to increase the efficiency or make things easier in the inefficient system, some people try their best to earn opportunities to take a shortcut. Plus, the undeveloped legal system brings people legal loopholes to use. The actual corruption or corruption in disguise are increasing. Even worse, the barriers can be man-made increased if the work itself is hard and the officials are not happy at the same time.
It is true that China’s bureaucratic structure and systems are at times outdated and sclerotic, requiring time-consuming and even redundant approvals, reflecting deep-rooted Communist and once-imperial DNA in Chinese officialdom. However, it will not change immediately and it will take a long time to reform. It should be noted that the China Government has already taken action. The officially released 2013 State Council reform plan in China and State Council reform in 2008 reflect that the China government has realized that the complexity and inefficiency of the bureaucracy. Although the bottom-up reporting system and top-down decision making system will not be changed, the overlapping responsibilities and divergent functions problems will be solved through reforms. It will make examine and approve system more simple which can result in less time waiting for necessary permits and licenses.
 Resource from official websites and Wikipedia.