Reform of reserves collected from businesses

A residential complex developed by Evergrande Real Estate Group in Qidong, Jiangsu province. [Photo provided to China Daily]

How many kinds of margins must an engineering enterprise pay a government? Dozens perhaps: a margin for credit, a margin for negotiations in case of disputes, an assessment margin, the list goes on.

Estimates put the total amount of guarantee money collected from construction companies as about 10 percent of their revenue.

It should be noted that these margins seldom serve the purposes that they claim to be for. Officials collect these margins from enterprises under the pretext that it ensures that the constructions activities abide by the regulations, but they seldom really exercise proper supervision over the true behavior of the enterprises. For example, they collect margins from enterprises supposedly to guarantee they pay their workers on time, but in reality the enterprises that pay these margins still delay paying their temporary workers.

Worse, some officials try to keep these margins by refusing to return them to enterprises when the project is finished. That increases the business costs for the whole of society and is detrimental to the nation's economic prosperity.

It is a good move by the central government to clear up the margins and cancel most of them. It must be firm in implementing the decision, because the reform will likely meet resistance as it hurts local governments' unwanted interests.