Curbs on local governments' preferential policies

NDRC to enact steps to ensure level playing field for businesses, check favoritism

Local governments will no longer be allowed to take steps that favor preferred enterprises in their region, as China steps up its efforts to ensure fair market competition for businesses in the country, officials familiar with the matter said on Wednesday.

The nation's five major regulatory agencies, including the National Development and Reform Commission, China's top pricing regulator, will issue guidelines on Thursday that restrict local governments from taking monopolistic steps or other market intervention measures that benefit some industries or companies, they said.

The guidelines would also urge local government officials to conduct a "self-review" on 50 don'ts before they issue any policies related to economic activities.

The 50 don't's are developed based on a document issued by the State Council in June last year, which it stipulates a broad negative list of 18 don'ts for local governments apart from the anti-monopoly law.

The guidelines will also spell out definitions and examples for policies that are in violation of the fair market principles, like those that guide enterprises' price-fixing behaviors and the discriminatory conditions for market entry.

For instance, setting barriers for exports or granting favorable conditions to preferred enterprises through fiscal subsidies will not be allowed, according to the guidelines.

Local officials will also be held accountable if they issue policies that violate fair market principles.

Enterprises can file lawsuits against local governments and report them to anti-monopoly law enforcement authorities if they violate the rules, according to the guidelines.

"The self-review process, which is compulsory, will help reduce the number of government-related cases on monopolistic behavior," said an official with the Price Supervision Bureau of the NDRC. "Some local governments simply disregard the rules and violate fair market principles."

The NDRC cracked down on 18 cases in 2016 where local governments were found to have aided enterprises' price-fixing by creating discriminatory conditions for market entry or urging businesses to use goods and services provided by designated producers.

Instead of focusing merely on market players, the commission is promoting fair market competition by putting more emphasis on enforcement of the governments' fair market competition review scheme this year, the official said.

The official said the fair market competition review scheme might be added to the anti-monopoly law, but there is no specific timeline for the revision.

Once the draft version is approved by the National People's Congress, the country's top legislative body, it will be illegal for policymakers to create preferential policies favoring certain companies or limiting market access.

"The revision will add authority to our future anti-monopoly law enforcement activities," the official said.