Streamlined approvals bring benefits, drawbacks

Source:Global Times Published: 2014-9-14 17:08:01

Decentralization will still require oversight from central authorities


Illustration: Lu Ting/GT



Editor's Note:

The State Council has canceled or delegated a total of 632 administrative approvals to governments at lower levels since it began a new round of restructuring and transformation of government functions in 2013, according to a report from the Xinhua News Agency last week. The Global Times interviewed three experts to get their views.

Li Mingliang, an analyst with Haitong Securities

The central government has greatly reduced its administrative intervention in the market by canceling or delegating a lot of administrative examination and approval items to local governments. This can help the market play an essential role in the allocation of resources. Meanwhile, it will be easier for private capital to set up or develop new businesses in the domestic market because of a shorter and more efficient government approval process. More active private participants can help the local economy prosper. 

However, reforms to the administrative examination and approval process might also have some negative effects. Many of the administrative examination and approval items are related to areas where local governments are very willing to invest, such as infrastructure construction. Local governments can decide on their own whether to approve the projects, so some of them may blindly invest a lot of money in these projects to show how well their government is doing. But these projects are usually expensive and aren't always necessary for local residents. So the local government's large-scale investment mania may exacerbate their debt problem because local revenue has shrunk due to the slowdown in the real estate market. Land sales were once the major source of the local government revenue.

To prevent the local government from investing in infrastructure projects without restraint, the central government must pay close attention to improving how it evaluates local officials. When assessing local officials' performance, the central government also needs to give more weight to local debt reduction, high employment rate and maintaining a reasonable budget. A reasonable appraisal system can effectively curb irrational investment by local governments.

Hu Xingdou, professor of political economics from the Beijing Institute of Technology

The government should legislate against overstepping power to effectively crystallize the process of approving business projects and thus revitalize the market.

In fact, removing the complexities from the government's administrative power can be seen as a change of the government's role. Actually, China's government is transforming from a "manager" to a "service provider." In order to keep society operating properly, the government is supposed to provide some public products. However, now that these products are usually manufactured in noncompetitive industries, there's a guiding principle that if privately owned enterprises would like to provide them, the government could also bow out of the market.

It doesn't mean that the government would not be condemned for inaction. What the government should really care about is enacting laws and regulations to protect property rights and create a better business environment. And these laws and regulations should draw a clear line when it comes to the rights and obligations of the government and corporations.

In developed countries, it's the trade and industry associations or investment intermediaries that take the role of coordinating the functions of an industry and ensure market competitiveness. But in China, some of these associations are still affiliated with government departments.

Lian Ping, chief economist at Bank of Communications

Enterprises can enjoy a streamlined government examination procedure for their establishment and daily operations. Because the central government has repealed or delegated a batch of administrative examination and approval items to local governments, enterprises don't need to repeatedly prepare and submit corporate materials to two separate levels of government. This will greatly help enterprises spend less time and money on examinations.

The central government will accelerate the transformation of government functions by streamlining administration and instituting decentralization. The central government will focus more on macroeconomic management than micromanagement. However, the central government must strengthen the supervision over local governments while pushing forward with the "delegation of powers." Some local governments may be conservative in administrative examinations and some may be very radical, so the central government should guide them to exercise their administrative powers from the actual local demands. Some local officials may profit illegally by abusing administrative powers, so the central government should do more to oversee local government approval mechanisms.

Local governments should improve their own government management policies now that the central government has delegated them more power over administrative examinations.

First, when the local government decides on some major infrastructure projects, they should not only rely on their own government experts to make decisions, but they should also adopt an independent third-party assessment mechanism to ensure the necessity and feasibility of the infrastructure projects.

Second, the local government should better manage their assets and liabilities so that the local construction projects will not damage their financial health.

In addition, some local governments have begun to publish regular, detailed information about local government debt. This marks important progress in making local governments more transparent so that the public can better supervise the government.

bizopinion@globaltimes.com.cn



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