Rules to improve level playing field for firms

China has rolled out a fair competition review system to enable private enterprises to compete on equal terms with other market players.

Experts said the regulations will help dismantle "invisible barriers" that have hindered the growth of private companies and help foster increased competition.

From Aug 1, administrative agencies and organizations legally authorized to manage public affairs must conduct fair competition reviews while formulating laws, rules and policies related to business activities, according to the new regulations.

The introduction of a fair competition review system signifies a step forward in promoting a market-oriented approach, where competition takes precedence, said Xu Hongcai, deputy director of the China Association of Policy Science's Economic Policy Committee.

By implementing this system, the government aims to minimize interference in the micro-economy. The approach highlights the decisive role of the market in efficiently allocating resources and encourages a level playing field for businesses to compete fairly, Xu added.

While its establishment holds numerous benefits, it is important to recognize that it is also a long-term, systematic and complex endeavor.

In 2016, the State Council proposed the establishment of such a system. In 2022, the amended Anti-Monopoly Law explicitly stated the need to establish and improve a fair competition review system, signifying its integration into the country's legal framework.

To date, China has issued several documents on this front. However, prior to the introduction of the regulations, there was a lack of specific provisions with a higher legal rank, said Zhong Gang, executive director of the Competition Law Research Institute at East China University of Political Science and Law in Shanghai.

The fair competition review system will still face notable challenges during its implementation, the Ministry of Justice said in a statement.

Discriminatory practices and differential treatment toward businesses, especially private enterprises, have emerged in areas such as market access, resource acquisition, government procurement, bidding process and subsidy allocation, the ministry added.

By prohibiting the inclusion of hidden restrictions on market entry and exit, the regulations aim to address pressing concerns facing businesses during market competition, such as the introduction of policies that may inadvertently exclude private enterprises or businesses from outside the region.

By promoting transparency and fairness, the regulations aim to foster a level playing field that encourages the participation of all businesses, regardless of their ownership structure or geographical location. This will help unlock the potential of private enterprises and attract investments from outside regions, promoting economic growth and innovation, Zhong added.

Meanwhile, the regulations will help promote regions where conditions are ripe to explore the establishment of cross-regional and cross-departmental mechanisms for fair competition review.

By involving multiple regions and departments, decision-making processes will be subjected to broader scrutiny, enhancing transparency and accountability in policy implementation while minimizing the potential for biased or protectionist practices, said Dong Zhongyun, chief economist at China AVIC Securities.

The encouragement of cross-regional fair competition review mechanisms aligns with the broader objective of building a unified national market characterized by high efficiency, standardization, openness and fair competition, Dong said.