Local govts need to adapt to unified national market

Editor's note: As decided at the recent Central Economic Work Conference, China will formulate regulations for the development of a unified national market. Sun Jin, a professor at the Law School of Wuhan University, spoke to Beijing News about the significance of the move. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The regulations will provide strong law-based support for the country's efforts to develop a unified national market. It's essential for the regulations to redefine the government's powers and responsibilities.

For a long time, the GDP was the most important factor for assessing the performance of local governments. To boost the local economy, governments relied extensively on industrial policies, including unreasonable tax incentives and other measures that fragmented the domestic market. This is a challenge, a chronic disease that needs to be overcome for the development of a unified national market.

The regulations, together with the regulations for fair competition reviews which were issued in 2024, aim to restrain local governments from intervening in the economy. The regulations need to delineate government powers and establish a negative list for local governments and their departments, making it clear what they should do to promote a unified national market and what is strictly prohibited. It will be a profound readjustment for local governments, because they will need to stop focusing only on GDP growth and make more efforts to pursue sustainable development.

How local governments uphold a unified national market and promote fair competition should be reflected in their performance assessment, and there should be a well-defined accountability mechanism with clear rewards and penalties. This is where the regulations could exert a real influence.

The regulations could also task local governments to not only consider local and short-term interests but also assess the impact of their intervention on the country's market, fair competition and the sustainability of growth.

"Involution-style competition" runs counter to high-quality development. The policymakers need to address the root of this problem. Local government policies are usually an important driving force for cutthroat competition between companies. Some local governments tend to concentrate on soliciting investment to secure immediate GDP growth and overprotect local companies through unfair policies and barriers. Therefore, the regulations should focus on rectifying this behavior.

Local governments should align their industrial policies with the values emphasized in the regulations, which are adhering to market principles and fair competition, developing a market-based and law-based business environment, and improving the efficiency of resource allocation, production and innovation.

The Central Economic Work Conference called for greater efforts to promote the shared development of online platform companies, merchants and their workers. This is because there is an imbalance in the income distribution among platforms, merchants and workers. The platforms rake in excessive profits, while the merchants earn very scant profits and therefore pass on the pressure to workers, such as food delivery riders and drivers for online ride-hailing services.

This growth pattern is unsustainable, and will eventually undermine the dynamism of the platforms and the economy as a whole. What the conference called for is in accordance with the country's general strategic direction of expanding domestic demand, promoting common prosperity and pursuing high-quality development.

That being said, when it comes to economic growth and the formation of a unified national market, local officials should not resort to shortsighted approaches. Instead, they should respect the market law and always bear the big picture in mind.