Let rule of law guide the mar­ket Govern­ment de­part­ments and so­cial or­ga­ni­za­tions should en­hance su­per­vi­sion with le­gal means to en­sure healthy op­er­a­tions

China Daily (Canada) - - COMMENT -

The next five years are key for China to es­tab­lish a mar­ket econ­omy with rule of law. Mar­ket econ­omy ruled by law guar­an­tees that the mar­ket plays a de­ci­sive role in the dis­tri­bu­tion of re­sources and that the govern­ment func­tions well. It re­quires the au­thor­i­ties ac­cel­er­ate the trans­for­ma­tion from ad­min­is­tra­tion-ori­ented mar­ket su­per­vi­sion to mar­ket su­per­vi­sion based on the rule of law, and at the same time deepen re­form of the ad­min­is­tra­tive ex­am­i­na­tion and ap­proval sys­tem.

Cur­rently the do­mes­tic con­sumer mar­ket en­vi­ron­ment does not ful­fill the re­quire­ment of re­leas­ing con­sump­tion de­mand. The scale of China’s over­all con­sump­tion by 2020 should be about 45 to 50 tril­lion yuan ($7.2 to 8 tril­lion), so it can be the main pil­lar of 7 per­cent GDP growth. Govern­ment mar­ket su­per­vi­sion has be­come the key fac­tor in­flu­enc­ing the over­all sit­u­a­tion of eco­nomic trans­for­ma­tion and growth. The su­per­vi­sion of con­sumer goods such as food or of mo­nop­oly in­dus­tries shows that it is hard to achieve ef­fec­tive mar­ket su­per­vi­sion with­out change to the su­per­vi­sion sys­tem that is cen­tered on ad­min­is­tra­tive su­per­vi­sion.

In re­al­ity, some au­thor­i­ties have both the power of ad­min­is­tra­tive ex­am­i­na­tion and ap­proval as well as the power of mar­ket su­per­vi­sion, which means they unavoid­ably pay more at­ten­tion to ex­am­i­na­tion and ap­proval while ig­nor­ing su­per­vi­sion. Ad­min­is­tra­tive ex­am­i­na­tion and ap­proval are a pre-reg­u­la­tion mea­sure for the au­thor­i­ties while mar­ket su­per­vi­sion con­trols op­er­at­ing ac­tiv­i­ties in the mar­ket. In a mod­ern mar­ket econ­omy, post-su­per­vi­sion is a more ef­fec­tive su­per­vi­sion mea­sure than pre-ex­am­i­na­tion and ap­proval. The pre-ex­am­i­na­tions and ap­provals re­quired should be as fe­was pos­si­ble. This re­quires strictly sep­a­rat­ing ad­min­is­tra­tive ex­am­i­na­tion and ap­proval with mar­ket su­per­vi­sion in the func­tions of govern­ment.

Pre-ex­am­i­na­tions and ap­provals are the govern­ment’s ad­min­is­tra­tive power, thus the ex­er­cis­ing of this power should be clearly de­fined in the law. Mar­ket su­per­vi­sion is mainly post-su­per­vi­sion, which should also be im­ple­mented ac­cord­ing to the law. Too many pre-ad­min­is­tra­tive ex­am­i­na­tions and ap­provals not only sup­press mar­ket vi­tal­ity, but they fail to guar­an­tee the ef­fec­tive­ness of su­per­vi­sion.

In the next fewyears, one of the cru­cial tasks to ac­cel­er­ate re­form of the ad­min­is­tra­tive man­age­ment sys­tem and es­tab­lish ef­fec­tive govern­ment is to pro­pel the trans­for­ma­tion of mar­ket su­per­vi­sion from ad­min­is­tra­tive-ori­ented to law-ori­ented and to re­con­struct the en­tire mar­ket su­per­vi­sion sys­tem.

First, a com­pre­hen­sive and au­thor­i­ta­tive mar­ket su­per­vi­sion or­ga­ni­za­tion should be es­tab­lished. Al­though the govern­ment has launched sev­eral mar­ket su­per­vi­sion laws and reg­u­la­tions in re­cent years, their func­tions are not sat­is­fac­tory. One of the main rea­sons for this is ad­min­is­tra­tive ex­am­i­na­tion and ap­proval power and su­per­vi­sion power have not been sep­a­rated. Some lo­cal ar­eas have re­cently tried to in­te­grate mar­ket su­per­vi­sion or­ga­ni­za­tions and achieved good ef­fects. With the con­sid­er­a­tion of huge-min­istry re­form, the au­thor­i­ties should in­te­grate and es­tab­lish a com­pre­hen­sive and au­thor­i­ta­tive mar­ket su­per­vi­sion or­ga­ni­za­tion at the State level.

Sec­ond, the au­thor­i­ties should ad­just the power struc­ture of mar­ket su­per­vi­sion and es­tab­lish a law en­force­ment or­ga­ni­za­tion that strictly sep­a­rates pol­i­cy­mak­ing and pol­icy im­ple­men­ta­tion. The new com­pre­hen­sive mar­ket su­per­vi­sion or­ga­ni­za­tion should in­te­grate the mar­ket su­per­vi­sion func­tions of the State Ad­min­is­tra­tion for In­dus­try and Com­merce and the Gen­eral Ad­min­is­tra­tion of Qual­ity Su­per­vi­sion, In­spec­tion and Quar­an­tine; and in­te­grate the an­titrust law en­force­ment power of theMin­istry of Com­merce, the Na­tional De­vel­op­ment and Re­form Com­mis­sion and the State Ad­min­is­tra­tion for In­dus­try and Com­merce to es­tab­lish an an­titrust bureau di­rectly un­der the State Coun­cil. It should im­prove the co­or­di­na­tion mech­a­nism be­tween the People’s Bank of China, the China Bank­ing Reg­u­la­tory Com­mis­sion, the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion and the China In­sur­ance Reg­u­la­tory Com­mis­sion to fo­cus more at­ten­tion on fi­nan­cial ac­tiv­i­ties rather than fi­nan­cial or­ga­ni­za­tions.

Third, leg­is­la­tion of mar­ket su­per­vi­sion should be strength­ened. The au­thor­i­ties should en­act a mar­ket su­per­vi­sion lawto es­tab­lish the le­gal sta­tus of su­per­vi­sion or­ga­ni­za­tions, sanc­tion vi­o­la­tors and put lim­its by la­won su­per­vi­sion. The Food Safety Lawand Drug Ad­min­is­tra­tion Law­should be re­vised to per­fect the food and drug su­per­vi­sion sys­tem. And anti-ad­min­is­tra­tive mo­nop­oly mea­sures should be in­cluded in the Anti-mo­nop­oly Law.

In a mod­ern mar­ket econ­omy, it is dif­fi­cult to guar­an­tee the ef­fec­tive­ness of mar­ket su­per­vi­sion if it solely re­lies on the govern­ment. So­cial or­ga­ni­za­tions such as in­dus­try as­so­ci­a­tions should be au­tho­rized with cor­re­spond­ing le­gal sta­tus so they can play a role in mar­ket su­per­vi­sion and en­sur­ing en­ter­prises’ self-dis­ci­pline.

The fre­quent con­sumer goods safety scan­dals that have been ex­posed re­flect the loop­holes in the govern­ment’s mar­ket su­per­vi­sion and the lack of self-dis­ci­pline. We should de­velop in­ter­me­di­ary or­ga­ni­za­tions in the mar­ket to pro­pel mar­ket su­per­vi­sion by law.

Al­though nu­mer­ous in­ter­me­di­ary or­ga­ni­za­tions have emerged in many in­dus­tries since the launch of re­form and open­ing-up, most of them are at­tached to ad­min­is­tra­tive or­ga­ni­za­tions and lack the nec­es­sary in­de­pen­dence re­quired. Thus these in­ter­me­di­ary or­ga­ni­za­tions have played a limited role in main­tain­ing mar­ket com­pe­ti­tion and mar­ket or­der. We should ac­cel­er­ate the un­cou­pling of in­dus­try as­so­ci­a­tions and sup­port en­ter­prises to es­tab­lish in­de­pen­dent in­dus­try or­ga­ni­za­tions, which can then take on ad­min­is­tra­tive man­age­ment func­tions from the govern­ment.

In­dus­try as­so­ci­a­tions should es­tab­lish a cor­po­rate gov­er­nance struc­ture to guar­an­tee their healthy de­vel­op­ment and set out their mar­ket su­per­vi­sion re­spon­si­bil­i­ties. The au­thor­i­ties should de­fine in lawthe in­de­pen­dence and man­age­ment frame­work of in­dus­try or­ga­ni­za­tions.

The trans­for­ma­tion of mar­ket su­per­vi­sion can guar­an­tee that the “mar­ket de­ter­mines re­source dis­tri­bu­tion” and the safety of China’s con­sumer mar­ket. The au­thor is pres­i­dent of the China In­sti­tute for Re­form and De­vel­op­ment.

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