China 2009 : Defining the Boundary between the Market and the State.

324 Pages·2009·3.536 MB·English

by  OECD

OECD Reviews of Regulatory Reform OECD Reviews of Regulatory
CHINA Reform
DEFINING THE BOUNDARY BETWEEN THE MARKET
AND THE STATE CHINA
China’s advance to a market economy is among the greatest economic success stories of
modern times. China has made enormous progress in developing the modern legal and regulatory
DEFINING THE BOUNDARY
foundation for the market economy. The private sector is now the main driver of growth, and
new laws have gone a long way toward establishing private property rights, competition, and BETWEEN THE MARKET AND THE STATE
mechanisms for entry and exit comparable to those of many OECD countries. At the same time
important challenges remain, including further clarification of the scope of state ownership, reform
of relations among central and local governments, firmer establishment of the rule of law, and
strengthening of regulatory institutions and processes.
China’s transition has recently been reviewed under the OECD Regulatory Reform Programme.
The review focuses on the overall economic context for regulatory reform, the government’s
capacity to manage regulatory reform, competition policy and enforcement, and market openness.
The review also examines the regulatory framework in the electricity and water sectors. As for
OECD countries, the review follows a multidisciplinary and highly interactive approach. A number
of OECD instruments and policies are used in this assessment, although the review also takes into
account the specific challenges faced by the Chinese authorities.
The review contains a comprehensive set of policy recommendations, which should support China
in its efforts to implement regulatory reforms in order to boost economic growth, job creation,
innovation and investment.
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OECD Reviews of Regulatory Reform
China
DEFINING THE BOUNDARY
BETWEEN THE MARKET AND THE STATE
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
The OECD is a unique forum where the governments of 30 democracies work together to
address the economic, social and environmental challenges of globalisation. The OECD is also at
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concerns, such as corporate governance, the information economy and the challenges of an
ageing population. The Organisation provides a setting where governments can compare policy
experiences, seek answers to common problems, identify good practice and work to co-ordinate
domestic and international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic,
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standards agreed by its members.
This work is published on the responsibility of the Secretary-General of the OECD. The
opinions expressed and arguments employed herein do not necessarily reflect the official
views of the Organisation or of the governments of its member countries.
Also available in French under the title:
Examens de l'OCDE de la réforme de la réglementation
Chine
Définir la frontière entre le marché et l’État
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FOREWORD
Foreword
T
he OECD Review of Regulatory Reform in China is one of a series of country reports carried out
under the OECD’s Regulatory Reform Programme, in response to the1997 mandate by OECD Ministers.
Along with the review of the People’s Republic of China, the OECD has assessed regulatory
policies in 23member countries, and in Russia and Brazil. These reviews aim at assisting
governments to improve regulatory quality – that is, to reform regulations to foster economic growth
and attain important social objectives. The reviews draw on the 2005 Guiding Principles for
Regulatory Quality and Performance, which bring the recommendations in the 1997 OECD
Report on Regulatory Reform up to date, and build on the 1995 Recommendation of the
Council of the OECD on Improving the Quality of Government Regulation.
The country reviews follow a multi-disciplinary approach and focus on the government’s
capacity to manage regulatory reform, including regulatory frameworks in specific sectors.
Taken as a whole, the reviews demonstrate that the implementation of a well-structured
programme of regulatory reform can make a significant contribution to better economic performance,
boost opportunities for future investment and enhance social welfare. Economic growth, job creation,
innovation, investment and new industries are boosted by effective regulatory reform, which also
helps to lower prices and increase choices for consumers. Comprehensive regulatory reforms produce
faster results than piece-meal approaches and help countries to adjust more rapidly and easily to
changing circumstances and external shocks. At the same time, a balanced reform programme must
take into account social concerns. Adjustments in some sectors have been painful, but experience
shows that costs can decrease if reform is accompanied by support measures, including active labour
market policies.
While reducing and reforming regulations are key elements of a broad programme of regulatory
reform, experience also shows that in more competitive and efficient markets, new regulations and
institutions may be necessary to ensure compatibility of public and private objectives, especially in
the areas of broad services to the public. The challenges faced by sectoral regulatory authorities are
discussed at length in this report. Sustained and consistent political leadership is another essential
element of successful reform, and a transparent and informed public dialogue on the benefits and
costs of reform is necessary to build and maintain broad public support.
The policy options presented in the reviews may pose challenges for each country. However, the
in-depth nature of the reviews reflect the emphasis placed by the OECD on ensuring that the policy
options presented are relevant and attainable within the specific context and policy priorities of the
country.
The Regulatory Reform Review of China is divided into three sections. The first covers the
overall economic context for regulatory reform. The second section assesses China’s policies covering
the government’s capacity to manage regulatory reform, competition policy and enforcement, and
market openness. The final section examines the regulatory framework for the provision of public
services and includes specific reports on the electricity and water sectors.
OECD REVIEWS OF REGULATORY REFORM: CHINA – ISBN 978-92-64-05939-9 – © OECD 2009 3

ACKNOWLEDGEMENTS
Acknowledgements
T
he OECD Review of Regulatory Reform in China could not have been completed without the
co-operation of many Government officials from the People’s Republic of China. Special
thanks are given to the Department of Economic System Reform of the National Reform
and Development Commission, the OECD’s partner in the project. The OECD would also
like to thank following Chinese agencies for the insights and input provided:
Administration for Quality Supervision Inspection and Quarantine, China Bank Regulatory
Commission, China Securities Regulatory Commissions, Ministry of Environmental
Protection, Ministry of Commerce, Ministry of Water Resources, State Administration for
Industry and Commerce, State Environmental Protection Agency, State Energy Regulatory
Commission, the Legislative Affairs Commission of National People’s Congress and the
Legislative Affairs Office of the State Council.
A draft of this review was discussed with a Chinese delegation led by Xu Shanchang,
Deputy Director General of the National Development and Reform Commission, during a
meeting of the Group on Regulatory Policy on 1December2008. Special thanks is given to
the following officials and individuals who acted as lead reviewers at the meeting: Philip
Andrews-Speed, Director of the Centre for Energy, Petroleum and Mineral Law and Policy,
University of Dundee, Scotland; Gary Banks, Chairman, Australian Government
Productivity Commission; John Graham, Dean, School of Public and Environmental Affairs,
Indiana University, United States; Charles Pigott, former Senior Economist, China Desk,
Economics Department, OECD; Russell Pittman, Director of Economic Research and
Director of International Technical Assistance, Economic Analysis Group, Antitrust
Division, United States Department of Justice; and Pierre Van de Vyver, Director General,
IGD-The French Institute for PPPs.
This review benefited from input of experts from member Countries in their
delegation in Paris and embassies in Beijing. It reflects contributions from the OECD Group
on Regulatory Policy, the Working Party on Regulatory Management and Reform, the Global
Forum on Competition, and the Working Party of the Trade Committee. In addition, the
Secretariat would like to acknowledge the comments of the Business and Industry
Advisory Committee (BIAC) China Taskforce and the Trade Union Advisory Committee
(TUAC).
As an input to the Review, the OECD organised two informal seminars in Beijing in
September2007 and March2008. The OECD would like to acknowledge contribution of the
following officials and individuals at those meetings: Wang Xixing, Assistant Dean, Beijing
University Law School; Lu Xiaobo, Director, Weatherhead East Asian Institute, Patrick
Jomini, Assistant Commissioner, Australia Productivity Commission; Graeme Hodge,
Director of the Centre for Regulatory Studies, Monash University, Australia; Michael Young,
Australian Team Leader, China-Australia Governance Program; Peter Jensen, Counsellor
Development, Australian Embassy Beijing; Daniel Trnka, Director, Department for
OECD REVIEWS OF REGULATORY REFORM: CHINA – ISBN 978-92-64-05939-9 – © OECD 2009 5
ACKNOWLEDGEMENTS
Regulatory Reform and Public Administration Quality, Czech Ministry of Interior; Yasutomo
Kojima, Economic Affairs Bureau, Japanese Ministry of Foreign Affairs; Shin Kim, Director,
Regulatory Research Center, Korea Institute of Public Administration, Hyung-Jong Lee,
Deputy Director, Economic Organizations Division, Korean Ministry of Foreign Affairs and
Trade, Per-Arne Hjelmborn, Minister – Economic Affairs, Embassy of Sweden Beijing;
Miguel Ceballos-Baron, Counsellor, EU Delegation, Beijing; Peng Xiaohua, Principal
Counsel, PRC Resident Mission, Asian Development Bank, Daryl Biggar, Senior Economist,
Australian Competition and Consumer Commission, Karen Hill, Director of Regulatory
Services, Department for Business, Enterprise and Regulatory Reform, UK, and Daniel
Assandri, Head of Power Systems, ABB (China) Ltd.
The main authors of this review are Charles Piggott – Chapter1, The Economic
Reforms of the People’s Republic of China; Nick Malyshev – Chapter2, Regulatory
Governance; Michael Wise – Chapter3, The Challenges of Transition for Competition Law
and Policy; Malory Greene – Chapter4, Enhancing Market Openness through Regulatory
Reform; Reza Lahiji – Chapter5, Infrastructure Services–Lessons from 30Years of Reform
in OECD Countries; Philip Andrews-Speed – Chapter6, Power Sector Reform; and, Simon
Spooner–Chapter7, Water Sector Reform.
Special thanks is given in the OECD Secretariat to Aziza Akhmouch, Greg Bounds,
Irene Hors, Laura Munro, Francois Nguyen (IEA), Flemming Olsen, Peter Scherer, Raed
Safadi, Jessica Hua Su, Xiao Wang and Charlie Tsai for useful insights and input; to Pedro
Andres-Amo for his tireless efforts on all fronts, to Randy Holden who edited the review
and to Jennifer Stein for the review’s layout and preparation.
This project was managed by Nick Malyshev under the supervision of Josef Konvitz
and with the encouragement of Mario Pezzini and Odile Sallard. It was carried out in the
context of the horizontal Programme on Regulatory Reform which is headed by the Deputy
Secretary-General Art De Geus.
The Regulatory Reform Review of China was made possible with the financial support
of Australia, Canada, the Czech Republic, Japan, and the United Kingdom.
The OECD Review of Regulatory Reform in China is published under the responsibility of
the Secretary General of the OECD.
6 OECD REVIEWS OF REGULATORY REFORM: CHINA – ISBN 978-92-64-05939-9 – © OECD 2009
TABLE OF CONTENTS
TTaabbllee ooff CCoonntteennttss
List of Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Regulatory Reform Priorities in the Wake of the World Economic Crisis . . . . . . . . . . . 15
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Part I
The Macroeconomic Context
Chapter 1. Economic Reforms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
The gradual transition to the market and its macroeconomic consequences. . . . . 32
Taking stock: Progress on reform so far and its contributions. . . . . . . . . . . . . . . . . . 48
Regulatory reform: The remaining challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Part II
Thematic Issues
Chapter 2. Regulatory Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Administrative reforms launched in the late1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Bureaucratic reality limiting more profound change. . . . . . . . . . . . . . . . . . . . . . . . . . 96
The institutional framework for the creation of regulation . . . . . . . . . . . . . . . . . . . . 98
Regulation at different levels of government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Tools for regulatory quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Administrative and judicial review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Regulatory impact analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Keeping regulation up to date and improving the business environment . . . . . . . . 109
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Policy options for consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Chapter 3. The Challenges of Transition forCompetition Law and Policy . . . . . . . . . . . 119
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Competition policy foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Substantive issues: Content of the competition law . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Institutional issues: Enforcement structures and practices . . . . . . . . . . . . . . . . . . . . 139
Limits of competition policy and enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Competition law and policy in the transition to a developed market economy . . . 146
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
OECD REVIEWS OF REGULATORY REFORM: CHINA – ISBN 978-92-64-05939-9 – © OECD 2009 7
TABLE OF CONTENTS
Chapter 4. Enhancing Market Openness throughRegulatory Reform . . . . . . . . . . . . . . . 151
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
The economic and trade policy context. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
The policy framework: Basic principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Transparency: Equal access to information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Non-discrimination: A core concept. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Unnecessary trade restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Internationally harmonised measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Streamlining conformity assessment procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
Some policy options for the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Part III
Regulatory Frameworks ForPublic Services
Chapter 5. Infrastructure Services: Lessonsfrom30Years
of ReforminOECD Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Infrastructure services in OECD countries: The state of play . . . . . . . . . . . . . . . . . . . 191
Policy options and challenges regarding infrastructure services. . . . . . . . . . . . . . . . 199
Lessons for the reform of infrastructure governance in China. . . . . . . . . . . . . . . . . . 218
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Chapter 6. Power Sector Reform. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
The context of the reforms in2002-04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Reforms to China power sector, 2002to2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Key trends and changes in China’s power sector, 2004-08 . . . . . . . . . . . . . . . . . . . . . 241
Re-evaluation of China’s sector reform plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
Implications of recent lessons in OECD and developing countries . . . . . . . . . . . . . . 259
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
Chapter 7. Water. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
Regulatory reform in China’s water sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Water quantity management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292
River basin water quality and integrated pollution control. . . . . . . . . . . . . . . . . . . . . 296
Drawing on the experience of water utility management from OECD countries. . . 305
Lessons for China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
Biblography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
Boxes
1.1. How economic reforms contribute to growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.2. Exchange rate management during the first half of reforms. . . . . . . . . . . . . . . . 36
1.3. Local protectionism has been declining in importance . . . . . . . . . . . . . . . . . . . . 49
1.4. China’s social benefits system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8 OECD REVIEWS OF REGULATORY REFORM: CHINA – ISBN 978-92-64-05939-9 – © OECD 2009