China Slashes Government Controls Over Business

China’s central government continues aggressive reductions to administrative controls over business investments under an administrative reform initiative pushed by Premier Li Keqiang.

Li’s push to liberalize the business sector gained steam Wednesday when the State Council announced the cutting of 75 more approval requirements and procedures. That brings to a total of 221 separate administrative controls that have been dispensed with since March when Li unveiled reforms designed to give market forces freer rein over investments.

The aggressive reduction of red tape is aimed specifically at investment projects subject to full market competition. However, they will still have to register with the appropriate government departments.

“The moves show that the government has relaxed its control on sectors open to market competition,” said Jin Linbo, vice-president of the National Academy of Economic Strategy at the Chinese Academy of Social Sciences. “It’s good news for private capital entering such sectors.”

The central government had launched its first round of reforms in April to streamline administrative procedures for investment, production and operation. In August the State Council announced that strict standards must be used in setting new approval requirements for products, for investments by enterprises and for qualification processes, while curtailing government authority over industries that can be governed by market forces.

“In the next step, policies for private enterprises will be further relaxed and private investment will be diverted into sectors such as public services and environmental protection, which will break the bottlenecks of these sectors, stabilize economic growth and expand domestic demand as well as keep China’s economic growth sustainable,” said Zheng Xinli, vice-chairman of the China Center for International Economic Exchanges.

Premier Li’s reform initiative also seeks to delegate more authority to local governments for projects that should be governed by industrial policies and technical standards.

Reducing the myriad central government red tape will encourage more private business investments to take the place of the government-controlled investments that have driven much of China’s growth during the past three decades. That shift will also encourage more foreign investors who had been held back by the lack of transparency and fears that their investments will be at the mercy of heavy-handed and corrupt government bureaucrats.