Setting Up a Business in China - Part V China Reforms

 Setting up a Business in China

China has a long history of reforms since reform and opening up (1978).  Since China entered WTO, reforms has been continuously deepening.  The most recent reform update was mentioned in the Eighteenth Congress of the Party and China turned a new page in the history since 2012.

 

Section 5

China Reforms

 

First Four Reforms since Reform and Opening up (1978)

China has been promoting reform since Reform and Opening up.  The first four major reforms happened in 1982, 1988, 1993 and 1998.

 

The first round of reform after the reform and opening up happened in 1982.   "Institution reform is a revolution", Deng Xiaoping said.  The key factors of reform were setting up the State Commission for Restructing Economy and the Ministry of Foreign Economics and Trade, as well as abolishing the essentially existing system of life tenure in leading posts.

 

The spearhead of attack of reform in 1988 is aimed directly at separation of enterprise from administration.  The government formed the new State Planning Commission.  After the reform, a few ministerial level corporations, such as CNPC (China National Petroleum Corporation), and the system of civil servant were created.  The most important character of the reform in 1988 was firstly pointing out the crucial issue of the transformation of government functions, not only the simple quantity changes of organizations anymore.  It was the breakthrough which marked the beginning of the government institution reform in China. 

 

The reform in 1993 pointed out that the reforms should adapt to the market economy.  The transformation from ministries to corporations also reappeared in the reform that year.  Ministry of Aerospace Industry was canceled and instead, China Aviation Industry Corporation and the General Corporation of Aerospace Industry were respectively set up.  The principle of the reform was changing functions, clearing the relationship, downsizing and streamline government organs, and improving efficiency.  

 

The problem of the integration of government administration with enterprise had not been solved since the reform in 1988 and 1993.  In 1998, the reform cancelled/degraded the nine major sectors of the economy.  After reform, the nine ministries included power, coal, chemical, etc., became history.  The State Planning Commission renamed as the State Development Planning Commission (SDPC).  The goals of the reform were to establish an efficient administrative management system, which followed the code of conduct and had coordinated operation, to improve the system of civil servants, to create a high qualified professional team of the state administrative management cadres and gradually establish a public administration system which adapted to the socialist market economic with Chinese characteristics.

 

The First 10-year Reforms after China entered WTO (2001-2011)[1]

On December 11, 2001, China became the 143th member of WTO.  Since then, the pace of China's administrative system reform has been speeding up further and the reform has been continuously deepening.  The connotation of the reform was also changed from single government administration adjustment to giving priority to further improve the systems of laws and regulations, construction and other related fields.  Reform of the administrative system has increasingly become a comprehensive and systematic reform.

 

In 2003, the Ministry of Commerce became a component of the new State Council, which commits to the unified international and domestic markets.   Administration and institution reforms focused on the transformation of government functions, promoting the economic society and all-round development of human being, and providing the systematic safeguards for the comprehensive building of a well-off society and a harmonious society.  The “Decision of the Central Committee of the Communist Party of China on Some Issues concerning the Improvement of the Socialist Market Economy " (hereinafter referred to as the " Decision ") adopted in the 3rd Plenary Session of the 16th CPC Central Committee was considered the first comprehensive planning and strategic deployment document about the country's economic system reform.  It aimed to "establish a full-fledged socialist market economic system and a more open and viable economic system", which drew a blueprint for the socialist market economic system reform.

 

On March 22, 2004, the State Council put forward the goal of basic implement of building a law-based government with ten years of unremitting efforts.  At the same year, the “Administrative License Law of the People's Republic of China” came into effect, accompanied by the reform of administrative examination and approval system.  The reform of administrative examination and approval system was considered to be "the government's own revolution", which reflected the start of the innovation about restriction and supervision system of power operation.

 

After the reform of the State Council in 2008, the number of organs composing the State Council was decreased to 27, except the general office of the State Council.  15 institutions changed and the number of ministerial level institutions was decreased to 4.  The reform suggested “local practical innovations under the unified leadership of the central government”.  As "Opinions on Further Reforming the Government Administration System" stated, “Local practical innovations are encouraged under the unified leadership of the central government.”  The “Opinions” also mentioned, “Through further reform, the systematic obstacles must be further eliminated, and the conspicuous conflicts and issues in the economic and social development must be tangibly solved, so as to propel the scientific development, promote the social harmony and better protect the interests of the people.”

 

By the end of 2011, the State Council cancelled and adjusted 2183 items of administrative examination and approval matters in five times in total, which was accounting for 60.6% of the total number of original items.  Each local authorities cancelled and adjusted administrative examination and approval matters more than half of the total number of the original items.  Facing the several social problems and conflicts of interest caused by the social transformation, the Communist Party of China were clearly aware of the importance to balance the development of economy and society.  They put forward the goal of building a harmonious society on their political policy.  The goal required the national policy reflect more about the social fairness and justice.  For instance, citizens had more convenient channels of political participation to express wishes and could be protected by laws and regulations.  The government system should take more responsible to society, be more efficient in the administrative management, and the government officials should have more integrity.

 

New Page of the Reform since the Eighteenth Congress of the Party (2012-recent)

The leadership group of the Party further strengthened the implement of comprehensively deepening reform and built awareness of promoting the national governance system and modern governance capacity.  In the aspect of deepening the reform, the Party put forward the tasks of "accelerating to promote systematism and sequencing of socialist democracy, to build a socialist country under the rule of law, and to develop the more extensive sufficient perfect people's democracy”, according to “The Decision on Major Issues Concerning Comprehensively Deepening Reforms[2] adopted in the Third Plenary Session of the 18th CPC Central Committee (2013).

 

The main points of this reform are listed below.

n  to keep to improving the basic economic system,

n  to speed up the improvement of modern market system,

n  to speed up the transformation of government functions,

n  to deepen the reform of fiscal and tax system,

n  to improve institutions and mechanisms for promoting integrated urban and rural development,

n  to build a new open economic system,

n  to improve the construction of socialist democratic political system,

n  to build China under the rule of law,

n  to strengthen the restriction and supervision system of power operation,

n  to promote innovation in cultural institutions and mechanisms,

n  to accelerate reform and innovation in social sectors,

n  to innovate the social management system,

n  to speed up the building of ecological civilization system,

n  to deepen the reform of army and national defense,

n  the CPC must strengthen and improve its leadership in comprehensively deepening reform[3]

 

On the Third Plenary Session of the 18th CPC Central Committee, Xi Jinping explained “The Decision on Major Issues Concerning Comprehensively Deepening Reforms”.  He mentioned that decisive results must be achieved in key sectors, and a well-developed, scientific, procedure-based and effective framework must be in place by 2020 to ensure institutions in all sectors be more mature. 

 

 

[1] References from Chinese websites. http://www.china.com.cn/economic/txt/2008-11/05/content_16716828_4.htm, http://union.china.com.cn/gaige/txt/2008-03/10/content_2113571.htm, http://www.moj.gov.cn/jjjcj2006/2006-01/23/content_343207.htm, http://www.gov.cn/test/2009-01/16/content_1207014.htm, http://www.scopsr.gov.cn/zlzx/zlzxlsyg/201209/t20120920_182788.html, http://news.xinhuanet.com/politics/2012-07/09/c_123385438_5.htm, http://theory.people.com.cn/n/2014/0114/c217905-24111670-3.html

[2] An abridged version of the full text of the document can be found on the China Daily website. http://language.chinadaily.com.cn/news/2013-11/18/content_17112855.htm; http://language.chinadaily.com.cn/news/2013-11/19/content_17115564.htm; http://language.chinadaily.com.cn/news/2013-11/20/content_17118489.htm; http://language.chinadaily.com.cn/news/2013-11/21/content_17121467.htm; http://language.chinadaily.com.cn/news/2013-11/22/content_17124660.htm; http://language.chinadaily.com.cn/news/2013-11/25/content_17129395.htm.

[3] English summary can be found on the China Daily website.  http://language.chinadaily.com.cn/2013cpctps/2013-11/14/content_17104012.htm