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Cover Stories Series 2014> Reform Initiatives Underway for 2015> Retrospect> Feature
UPDATED: October 6, 2014 NO. 41 OCTOBER 9, 2014
Cutting Out Red Tape
Small and micro businesses greatly benefit from the reform on government functions
By Zhou Xiaoyan

Guo Huazhong, the company's general manager, said the local government backed him up during the initial phase of the company's development.

"Back in 2009, when my company moved into the Hantian Science Park, we had a large financing demand because we needed to build several production lines," Guo said. "I used my company's intellectual property rights as collateral to get loans and the local government offered third-party guarantee for my company, therefore I got 3.5 million yuan ($570,441) in loans at a very reasonable rate of interest."

Guo said his company has been helped by the government's efforts in attracting more talent to the city.

"Every year, the local government gathers questions from companies and then goes to top universities in search of answers to those questions and to woo talented students."

Tian Guangjiang, a legal specialist with Bubugao Electronics, said it takes a much shorter time to get a business license than before.

"In the past, I had to wait for hours both inside and outside the office for business registration. Now it's much faster. One time, I handed in the application papers and got the license one hour later," said Tian.

Zheng Canru, head of the Nanhai District of Foshan, Guangdong Province, said small and micro businesses are confronted with three major obstacles: the market, financing and technologies.

"Any businesses that can surmount these difficulties can enjoy runaway growth. From the government's perspective, we are helping them in three ways accordingly," said Zheng.

"We organize fairs for them to promote their products in other cities in the country or even overseas. Second, we have made tremendous efforts in channeling funds to small and micro businesses, including encouraging private financial institutions to lend to them, establishing an over-the-counter market for them and earmarking 100 million yuan ($16.3 million) as credit guarantee for them. Finally, we reward businesses that have made scientific and technological breakthroughs," he said.


In the wake of the government loosening the market entry threshold for businesses, it has become a matter of increasing urgency to strengthen supervision, analysts say.

Starting from October 1, the annual inspection of companies will be replaced by a reporting system publicly available, as part of the country's efforts to build up an integrity system nationwide.

"Strengthening post-establishment supervision is as important as streamlining government approvals. Every time the State Council cancels an administrative approval item, it correspondingly formulates a measure to strengthen post-establishment supervision. This is one of the key principles of the reform on government functions," said Li Zhangze, spokesperson with the Leading Group Office of the State Council Administrative Approval System Reform.

Ma Fu, Director of the Bureau for Registration of Foreign-invested Enterprises under the State Administration for Industry and Commerce, said that in the past, the boundary between the market and the government was not sufficiently clear.

"The government has governed too many things that could have been ably managed by the market, which ends up an over-abundance of items that require government approval. Therefore, since the new government was formed in March 2013, we have greatly reduced approval items, but that doesn't mean the government will cease its supervision of market entities," said Ma.

"What the government needs to do is to create and maintain rules in the market. That is to say, if businesses abide by the law, they will not so much as be aware of the government's presence. But if they breach the law, they would be subject to severe penalties," said Ma.

Zhou Daoyi, Financial Executive of Nine Dragons Paper (Holdings) Ltd., said he wished for more government departments to be involved in the reform.

"Right now, the State Administration for Industry and Commerce has carried out the most reforms, in terms of business registration and administrative approvals. The fruits of the reforms then forced other departments to change," said Zhou. "I hope all government departments are equally enthusiastic about these reforms."

Guo, General Manager of Ruizhou Technology, said he thinks it would be a good idea for the government to accelerate the establishment of a nationwide integrity system to make people who don't abide by the law pay heavier prices.

"Some job hunters have often blackmailed companies in the past and they should be put into a 'blacklist' so that potential hiring companies can be warned of the risks."

"Also, the local government can host lectures regularly to analyze those cases in which companies are penalized to specifically tell us what we are allowed to do and what not to do," he said.

"Eventually, I hope the government can transform from an administrator to be a provider of public services," he said.

Efforts to Build a Streamlined Government Administration

- China lifted restrictions on minimum registered capital, payment deadlines, and the down payment and cash ratios for registered capital on March 1, a move aimed at encouraging start-ups and energizing the economy. From March to August, the number of newly registered companies reached 1.76 million, surging 68 percent year on year, according to data from the State Administration for Industry and Commerce.

- China is also making efforts to ease market maneuverability by reducing the amount of administrative approvals required for businesses. Such approvals will now entail simpler procedures, take a shorter time to be processed and involve more transparency. According to data from the State Council, since the new government was formed in March 2013, a total of 632 items subject to government approval have been canceled or delegated to lower government levels. It plans to cancel or decentralize more than 200 administrative approvals this year to unleash more market dynamics.

- A list of administrative powers, which defines the scope of what the government can do, will be published to prevent the abuse of power; a negative list, which defines areas off-limits to businesses, will be formulated to increase transparency and fully unleash the latent potential of businesses; and a list of government responsibilities, which defines how the government should properly regulate the market, will be put in place to expose its actions to public scrutiny.

(Compiled by Beijing Review)

Email us at: zhouxiaoyan@bjreview.com

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