Chinese government strives to make market regulate itself

BEIJING - China has made significant progress since 2013 in streamlining its administration, and the campaign is entering a critical period.

By the end of 2014, about one third of the 1,526 approval items that were subject to central government control had been canceled or delegated to lower agencies.

Business registration procedures have been simplified and a "negative list" is used prominently in free trade zones. Startups now only need to apply to one office for the three essential business certificates, rather than the current regime of visits to three different offices.

The policies seem to be working, as the number of newly registered enterprises surged 19.4 percent in the first half of this year over that in the same period of last year -- a rare glimmer of hope in an otherwise gloomy economy.

The groundswell of entrepreneurship has helped stabilize the job market. The jobless rate in 31 major Chinese cities fell to 5.06 percent at the end of June after rising to 5.19 percent in March.

So far, reform has been largely confined to easing administrative procedure. Areas requiring more courage, such as scaling back government intervention in micro-economic activities and breaking monopolies, still have a long way to go.

"China's administrative transformation has entered deep water that demands greater determination," noted Chi Fulin, director of the China (Hainan) Institute for Reform and Development.

In the latest move, the State Council on Tuesday began the process of severing the traditionally close relationship between government and trade associations. From 2018, the government will stop directly sponsoring these associations and instead contract their services as outside agents.

"This is a complicated and difficult task given the large number of associations across all industries. Conflicts of interests will ensure that it is very difficult to implement the plan," said Sun Fengyi, a research fellow with the institute of economic system and management, part of the National Development and Reform Commission.

While cutting loose the trade associations, the government will tighten external supervision, something Chi believes is essential for the next stages of reform. Only if the market is self-regulating can legislation keep pace with ongoing reform.

Chi expects the government to come up with a plan to transform the current administrative regulations to law-based market supervision.