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Progresses in the State Council's Work to Deepen the Reform of the Administrative Examination and Approval System and Accelerate the Transformation of Government Functions
2014/09/21

Accelerating the transformation of government functions, streamlining administration and delegating power to lower-level governments have been the top priority of China's current central leadership since they took office. Deepening the reform of the administrative examination and approval system has been an important focal point to carry out these efforts. Premier Li Keqiang once solemnly pledged to cut existing administrative approval items by at least one third during his term. For more than one year, the Central Government, in accordance with the Administrative Licensing Law, has vigorously streamlined administration and delegated more power to lower-level governments. Meanwhile, it has combined delegating power with tightened supervision; strengthened oversight over delegated matters while these matters are handled or after they have been handled, pursued innovative governance, and transformed government functions. Some results have been seen at this stage. Major measures to streamline administration and delegate power have been taken in the following four areas:

1. Vigorously pushing forward reform of the administrative examination and approval system. Reforming the administrative examination and approval system is the top priority in accelerating the transformation of government functions. For more than one year, the State Council has abolished or delegated to lower-level governments seven batches of 632 items previously subject to its examination and approval. These items include the verification and approval of enterprises' investment projects, licensing of enterprises' production and operation activities, and certification of the qualifications of enterprises, social organizations and individuals. For example, a number of examination and approval items have been abolished, such as the recording, verifying and approval of licenses to operate basic telecommunication services and trans-regional value-added telecommunication services; examination and approval for domestic general aviation companies to offer general aviation services overseas; the verification of coal production licenses and the examination and approval for setting up coal trading companies; and the examination and approval for micro and small enterprises to qualify for preferential income tax treatment. The power to license inter-provincial waterway transportation of common commodities and the power to examine and approve urban rail transit systems have been delegated to provincial-level governments, which should examine and approve these items according to government ratified plans. The State Council has revised the catalogue of investment projects requiring government examination and approval, reducing the number of enterprise investment projects to be examined and approved by the State Council departments by 60 percent. The management of 31 types of numerous investment projects subsidized by the Central Government and involving a large number of places and stakeholders but a small amount of fund for individual project has been delegated to local governments. The State Council has publicized the first batch of 80 demonstrative projects that welcome private investment. These projects are in fields such as transportation infrastructure, infrastructure for the new generation of information technology, clean energy, oil and gas pipeline networks and storage facilities, modern coal chemical industry and petro-chemical production bases, among others.

2. Reforming the business registration system. Previously, a company had to get administrative approval before applying for a business license. Now, they can obtain a business license before gaining administrative approval. The reform has also changed the "paid-in registered capital system" into "subscribed registered capital" system. After the reform, 126 items – equivalent to three fifths of the total– that were subject to administrative examination and approval prior to business registration, are now subject to administrative examination and approval after business registration. The annual inspections of companies are replaced with an annual reporting system. These measures are expected to facilitate business registration.

3. Adjusting policies on fiscal transfer and corporate taxes and fees. The State Council has reduced and integrated special fiscal transfer projects. The number of such projects has been reduced from 220 before the reform to about 150 after the reform, down by nearly one third. Administrative charges have been reduced vigorously. Thirty four administrative charges at the Central Government level and 314 at local government level have been abolished, while 20 types of administrative charges have been lowered, reducing enterprises and individuals' total annual burden by 10 billion yuan. Replacement of business tax with value-added tax has been piloted in larger areas. Tax reduction and exemption have been granted to micro and small enterprises. Financial policies such as targeted lowering of bank deposit reserve ratio have been implemented to support rural areas, farmers, rural areas and agriculture as well as micro and small enterprises.

4. Publishing items currently still subject to administrative examination and approval by various departments under the State Council, and eliminating all non-administrative examination and approval items. We have produced a comprehensive and clear list of the items currently still subject to the administrative examination and approval by various departments under the State Council and released the list to the public. After reform benchmarks were set, supervision has been conducted by society, so as to patch up institutional loopholes that allow various government departments to set up administrative examination and approval requirements at will. Many non-administrative licensing examination and approval items, though not administrative licensing in name, are actually related to the public and enterprises. Their creation is quite random, their implementation not standardized, and they contravene the principles of law-based administration and the rule of law. The State Council has launched a special campaign to clean them up, so as to block "side doors" and eliminate gray areas. Meanwhile, the State Council has tightly controlled the creation of any new administrative licensing items, and strictly specified the standards, review procedures and supervision methods related to the establishment of such new items.

In the past year or so, important achievements have been made in streamlining administration and delegating power to lower level governments. These efforts have liberated the market, invigorated enterprises, sparked enthusiasm for making private investment and starting businesses, and added jobs continuously. The general public speaks quite highly of these achievements. In 2013, a total of 11.3154 million new businesses were registered, up 19.6 percent year on year. The growth rate was 17.8 percentage points higher than that of the previous year. The number of newly registered private enterprises went up by 30 percent, the largest annual increase in recent years. Private investment grew by 23.1 percent, and its share of total fixed asset investment rose to 63 percent. From January to June 2014, altogether 5.9395 million new businesses were registered, up 16.71 percent year on year. The number of newly registered primate enterprises increased by 60.17 percent, and private investment rose to 65.1 percent of total investment. The number of employees in individual-owned or private businesses grew sharply, up by more than 13 million in the first six months of 2014, representing an increase of more than three folds year on year.

To boost the market's supervision role, major measures have been taken in the following three areas:

1. Firmly stepping up supervision on matters related to people's health, as well as personal and property safety and matters that may hamper fair competition. In 2013, the number of environment-related cases transferred by various levels of environment protection bureaus to public security bureaus exceeded the sum of the previous 10 years. The State Council attached more importance to safe production, and rigorously investigates and handles serious safety accidents and punishes responsible persons. In 2013, the number of extraordinarily serious safety accidents dropped 16.9 percent. The State Council restructured the food and drug administration and launched special campaigns to ensure food and drug safety. It also put infant formula milk under strict supervision, which has been regulated according to the standard for drugs.

2. Tightening follow-up supervision on delegated items. For abolished or delegated administrative examination and approval items, relevant State Council departments studied them item by item and proposed supervision measures while these items were handled or after they have been handled. These measures include informative filing, giving play to the role of industry associations, making industry standards, improving credit management system, conducting regular and irregular random inspections, and strengthening the administrative accountability system. Great efforts have been made to delegate power and responsibility simultaneously, and strengthen regulation and supervision simultaneously.

3. Innovating and improving market supervision systems. The State Council has made 27 specific reform measures, which cover market entry and exit, the supervision of market players and regulatory agencies, as well as the market supervision mechanism and the guarantee system for that mechanism. The State Council is vigorously innovating supervision methods. It has promulgated a provisional regulation on enterprises' information disclosure and a plan on constructing a social credit system (2014-2020), which is expected to constrain corporate behaviors, and enhance social credit awareness and credit level.

Simultaneously, the State Council continues to improve government work style, and vigorously fulfill commitments and implement policies. First, it strictly abide by the "three-point rule" which requires that the number of government employees should be reduced; no new offices, halls or guest houses for government use should be constructed, and office spaces should be used according to standards; and the "three public expenses" including spending on official hospitality, official overseas trips and official vehicles should be strictly curbed. In 2013, in government departments and public institutions at the central government level, the actual spending on the "three public expenses" was 954 billion yuan below the budgeted level; 31 provincial level administrative units cut their expenses in these areas by approximately 26 percent. Second, the State Council has vigorously implemented policy measures. From June to July 2014, the State Council had dispatched eight supervision groups to evaluate the progresses made by various levels of governments in implementing the 60 policy measures launched by the State Council under China's new leadership. The policies measures span 19 fields and are aimed to stabilize economic grow, promote reform, adjust economic structure and improve people's livelihood. The supervision groups also conducted special review on progresses in reforming the administrative examination and approval system. Third party appraisal and public evaluation have been introduced. The supervision is expected to push forward policy implementation and boost public confidence in government.

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