The CCP’s approach to running China before 1978 was to manage economic activity through a highly centralized regime. The government allocated or controlled the resources and activities of individuals and enterprises, which stifled creativity and innovation, and produced severe scarcities. Economic reform in China over the past 40 years has involved disaggregating governmental functions to functionally specialized institutions and to more local levels, as well as granting individuals, enterprises, and society at large much more space and freedom. Economic reform and the reform of economic regulation in China has been broadly analogous to regulatory reform processes in the West starting from the late 1970s, and Western regulatory theory has been influential in Chinese reform.
Reform-era changes have transformed Chinese state-owned enterprises (“SOEs”) and collectively-owned enterprises, to make them compete with other market players. Still, government agencies remain major “shareholders” of SOEs, and they find it difficult to implement pro-market laws adequately and treat all market players fairly, leading to efficiency losses and ineffective allocation of resources. In recent years, the Chinese government has been quite conscious of this problem, and has attempted to tackle it, as a core agenda item for further reform. Progress has been impeded by political considerations (in that SOEs are declared to be foundational in the 1982 PRC Constitution), by vagueness in the relationships between regulatory law/policy and competition law/policy, and by divergent understandings of relevant laws and policies among multiple enforcement authorities.
China further deepened its policies of “reform and opening up” in 2018, by establishing the “pre-entry national treatment plus negative list” model as the standard for entry by foreign investors. The new Foreign Investment Law (passed in March 2019) reaffirms this principle. A negative list for Chinese private investors was also promulgated in 2018. As a result, SOEs, private enterprises, and foreign enterprises have been put on a more similar footing. Moreover, the Chinese central government has now defined competition policy and competitive neutrality as basic policies. At the same time, in the ongoing trade dispute between China and the United States, one of the most important structural issues raised by the U.S. is the status of SOEs. Whatever is the outcome of US-China negotiations, regulatory reform and competitive neutrality will remain important issues in the relationship between the two countries for a long time to come.
All of these factors and developments make this a timely occasion to consider new policy proposals in this area. China will certainly face ever greater demands—from abroad and in the process of shaping domestic reform agendas—to clarify and develop its policies and laws. Efforts to do so will benefit from relevant international experience.
2. Participants from the Chinese Academy of Social Sciences, Institue of Law
ZHOU Hanhua, “Regulatory Reform in China”
LIAO Fan, “Competitive Neutrality in the Background of the WTO Reform”
ZHOU Hui, "China's Telecom Regulation and Legislation in the Platform Economy Era"
LI Xia, “Regulation of PPP Projects in China: Policies and Tools”
MAO Xiaofei, “Competitive Neutrality of Chinese SOEs”