Administrative inspections of firms to be strictly regulated, streamlined

China will introduce stricter regulations governing administrative inspections of enterprises, the State Council said on Monday, after it recently highlighted the abnormal growth in penalty and confiscation revenues and excessive out-of-jurisdiction inspections.

Administrative inspections are a crucial means for government agencies to fulfill their regulatory responsibilities and guide enterprises to operate in accordance with the law, emphasized a State Council executive meeting chaired by Premier Li Qiang on Monday.

However, the frequency, intensity and precision of these inspections must be carefully calibrated to strike a balance between oversight and not overburdening businesses, which will help anchor market expectations, according to the meeting.

The key requirements, as outlined at the meeting, include clearly defining the government agencies responsible for conducting these inspections and streamlining the list of approved inspection items, in order to stem the phenomenon of arbitrary inspections.

Meanwhile, the new regulations will require government agencies to adhere to strict standards and procedures when carrying out administrative inspections, including limiting the frequency of on-site visits to businesses, according to the meeting.

It was highlighted that regulating administrative inspections of enterprises will be a key focus of a campaign to standardize law enforcement practices targeting businesses next year.

The upcoming campaign will prioritize the timely resolution of the most pressing problems identified by businesses, while also significantly increasing the penalties and accountability measures for officials found to be engaging in unauthorized or disproportionate inspection practices, according to the meeting.

On Dec 16, during another meeting chaired by Li, the State Council said that issues of administrative overreach and unfair enforcement practices continue to exist in certain sectors and regions.

Situations such as the abnormal growth in penalty and confiscation revenues, the proliferation of out-of-jurisdiction enforcement actions, and the imposition of disproportionately high maximum penalties should receive close attention, it said.

The regulation efforts come after the relatively high growth in nontax revenue, which includes fines and confiscations, as well as returns on State-owned assets and capital.

In the first 11 months of this year, nontax revenue reached about 3.7 trillion yuan ($507 billion), up 17 percent year-on-year, while tax revenue declined 3.9 percent year-on-year to 16.19 trillion yuan, data from the Ministry of Finance showed.

The market is closely monitoring the growth in nontax revenue because of the potential risks it poses to the business climate and market sentiment.

At a news conference in late October, the ministry said the government has been proactive in utilizing various channels to activate and maximize the value of State-owned assets and capital, which has been a key driver behind the robust growth in nontax revenue in the first three quarters.