Measures and Primary Effects of the Reform of Government

Examination and Approval System

(September 10, 2014)

The State Council Office of the Government

Examination and Approval System Reform

Deepening the reform of the government examination and approval system and accelerating the transformation of government functions is an important task deployed by the 18th National Congress of the Communist Party of China (CPC) and the second and third plenary session of the 18th CPC Central Committee. After the State Council of the new administration was formed, it has taken accelerating the transformation of government functions, streamlining administration and delegating power as the priority and made deepening the reform of the government examination and approval system an important instrument and starting point. Premier Li Keqiang has attached great importance to this and proposed to slash more than 1/3 of the items that used to require government examination and approval during the term of this administration. He has presided over more than 10 State Council executive meetings to study this issue, convened two national teleconferences to make deployments, and given a series of important directives. According to the deployments of the CPC Central Committee and the State Council, the State Council Office of the Government Examination and Approval System (hereinafter referred to as the Office of Government Examination and Approval Reform), in conjunction with other departments of the State Council, has taken a string of steps to stimulate the economic and social vitality in the past one-plus years. In light of the Administrative Permission Law of the People's Republic of China, they have focused on the main difficulties and worked hard to delegate power to the market, the society and local governments, while intensifying in-process and post-supervision at the same time. Thanks to the united efforts of all parties, major periodic progress has been made in the reform of the government examination and approval system and the transformation of government functions.

I. Publicizing the list of items requiring government examination and approval from various departments of the State Council

Identifying all current items requiring government examination and approval and publicizing them to the society is groundwork to promote the reform. To clearly ascertain the base number, the Office of Government Examination and Approval Reform has repeatedly checked and verified the items requiring government examination and approval from various departments, solicited opinions from various State Council departments and commissions, affiliated institutions, provincial governments, related industrial associations, research institutes and experts and scholars in relevant fields, and fed the 4,411 opinions back to relevant departments. The departments have made supplements and revisions based on the feedback and confirmed the items requiring government examination and approval from them. Based on careful verification, the departments removed the items that were abolished or delegated in the past few years, counted repeatedly, untrue, and involving the internal management of government bodies, and also supplemented a few items according to actual situations. It was eventually confirmed that 1,235 items (excluding those concerning comparison, benchmarking, commendation, evaluation and charge) currently require government examination and approval from 60 departments of State Council.

At present, the items requiring government examination and approval from various departments have been made public on departmental websites and the www.scopsr.gov.cn (website of the State Commission Office of Public Sectors Reform, known as SCOPSR). This not only blocks the loopholes that government examination and approval may be implemented on items outside the list, but also serves as an effective channel to extensively collect public opinions and gather reform dynamism. It also accumulates experience and creates conditions to promote the system of power list for government departments and negative list for market access.

II. Abolishing and delegating government examination and approval items

To straighten the relation between government and market, government and society and between the central government and local governments, and to reduce the government’s micromanagement, the State Council has abolished and delegated 632 items requiring government examination and approval in seven phases in the past year and more. A large number of items concerning the approval of enterprises’ investment and license for their production and operation activities have been abolished or delegated. For instance, abolished items include the recording and approval of license for undertaking basic telecommunication business and cross-region value-added telecommunication business, approval for domestic general aviation enterprise to undertake overseas general aviation business, review and issuance of coal production license, approval for setting up coal enterprise, and approval of income tax preferences for small and micro enterprises. Delegated items include the provincial license for water transportation of general goods and the approval of urban rail transit, which will be undertaken by the provincial government according to the state-approved plan. The list of abolished and delegated items requiring government examination and approval goes far beyond these examples.

The third plenary session of the 18th CPC Central Committee laid down the principles and direction as to whether items requiring government examination and approval shall be abolished or delegated. To be more specific, the central government's administration in micro affairs shall be reduced to the greatest extent, all government examination and approval procedures for economic activities under the effective regulation of the market mechanism shall be cancelled, and large-scale and wide-ranging economic and social matters directly involving the grassroot level that can be more conveniently and effectively managed at the local level shall be delegated to the local and community level. The Office of Government Examination and Approval Reform has adhered to this principle when studying which items shall be abolished or delegated. Some departments doubted whether the abolishment of certain items requiring government examination and approval would result in chaos, and proposed a two-step approach to delegate those items first and see what the effects will be. In response, the Office of Government Examination and Approval Reform transferred the opinions on abolishment solicited from various parties as well as the evaluation and suggestions made by experts on abolishment and delegation to those departments and communicated and coordinated with them, and insisted on abolishment if it is feasible. Regarding those items that shall be abolished from the holistic perspective but cannot due to the current conditions, the Office of Government Examination and Approval Reform discussed with relevant departments and decided to delegate a part of them first in order to facilitate the administrative counterparts and improve the approval efficiency, while urging the departments to explore new management approaches so as to pave the way for future abolishment.

III. Clearing out approval-requiring items not subject to administrative permission

After the Administrative Permission Law of the People's Republic of China was issued and implemented, the State Council, based on the need for effective administration at that time, decided in 2004 to retain some approval-requiring items not subject to administrative permission that involve the government’s internal management, and made it clear that those items will be gradually abolished or adjusted with the improvement of the socialist market economic system. Later, various departments have successively set up a raft of approval-requiring items not subject to administrative permission in diverse forms, including items subject to administrative permission imposed on citizens, legal persons or other organizations under the disguise of non-administrative permission. The setup and implementation of such items doesn’t comply with the rules. Among the 1,235 publicized items requiring government examination and approval from State Council departments, 369 are not subject to administrative permission.

In April this year, the State Council printed and distributed the Notice on Clearing out Approval-requiring Items Not Subject to Administrative Permission in State Council Departments (Guo Fa [2014] No.16) to clear out those items and resolutely block the side doors. Based on the target of approval, the Notice divides the items not subject to administrative permission into two categories, one targeting the citizens, legal persons and other organizations, and the other targeting local governments, and proposes to either abolish, delegate or adjust those items accordingly. On principle, items targeting the citizens, legal persons and other organizations shall be abolished, although exceptions, which shall be strictly controlled, can be made for adjustment. In other words, those items will all be abolished first, and those that must be retained shall follow the new administrative permission procedures, which shall also be strictly controlled at every step. Items targeting the local governments shall be abolished or delegated as much as possible, and those that must be retained due to actual conditions shall be adjusted to be subject to the government’s internal approval following relevant procedures and placed under standard management. This measure is aimed to both clear away the long-standing obstacles and intensify standard management, with the ultimate goal to thoroughly eliminate this gray zone and institutionalize and standardize the government examination and approval system within a year.

After the Notice was printed and distributed, all 49 departments with approval-requiring items not subject to administrative permission began to comprehensively clear out such items, worked out details plans and are dealing with those items in three ways as required.

IV. From pre-approval to post-approval for industrial and commercial registration

Changing the pre-approval for industrial and commercial registration to post-approval means the approach of “administrative permission first, business license later” is changed into “business license first, administrative permission later”. As an important reform of the business registration system and also a major part of the reform of the government examination and approval system, this change is of great significance for lowering the threshold for business startup and facilitating investment. Leaders of the State Council have paid close attention to this and given important directives many times. In view of the reform requirement, for items that used to require pre-approval according to laws, administrative rules and the State Council’s decisions and that are not involved in national security and citizens’ life and property safety, business entities can register at the industrial and commercial authority first and are able to carry out general business activities after obtaining the business license. If they want to engage in production and operation activities that require a permit, they can apply to the competent authority with the business license and relevant materials.

This reform task is in smooth progress now. First, the base number is identified. Items requiring pre-approval for industrial and commercial registration submitted by the State Council departments are compared with those being implemented across China, and altogether 226 such items are confirmed. Second, the first list of 36 items and the second list of 90 items for which pre-approval for industrial and commercial registration shall be changed into post-approval have been reviewed and passed at executive meetings of the State Council. This leaves 66 items still subject to pre-approval except for those already abolished or planned to be abolished in the clearing process. Third, the third list of items for which pre-approval shall be changed into post-approval will be put forth before the end of the year, and a catalogue of items requiring pre-approval for industrial and commercial registration will be developed and publicized. After that, pre-approval shall not be implemented on items not included in the catalogue, and the remaining items that still require pre-approval shall be placed under rigorous and standard management.

For each list, the industrial and commercial authority and relevant departments proposed measures to intensify in-process and post-supervision according to the principle of “wide access and strict management”, so as to prevent any inconvenience because of the changing approval procedures and maintain the normal market order. Items that now require post-approval shall also be abolished as much as possible in light of the requirement for “streamlining administration and delegating power”. Items that can be regulated by market mechanism and managed through intensified in-process and post-supervision shall no longer be subject to approval, so as to create a relaxing environment for enterprises.

V. Intensifying in-process and post-supervision

Premier Li Keqiang emphasized repeatedly that reform doesn’t mean complete delegation of power, but should place equal importance on delegation and regulation. To intensify in-process and post-supervision, many departments have taken a series of measures according to actual conditions, including informative recording, formulating industrial standard, improving credit management system, conducting regular and irregular spot check and strengthening administrative accountability. For instance, the China Banking Regulatory Commission and the General Administration of Quality Supervision, Inspection and Quarantine demanded to reinforce interfacing, implementation and supervision after relevant approval-requiring items are abolished or delegated, the Ministry of Transport put forth 27 supervision regulations after certain items requiring maritime approval are abolished or delegated, and the Ministry of Water Resources also specified the conditions and standards for water conservancy projects to start construction and will intensify supervision and inspection.

In June this year, the State Council printed and distributed the Several Opinions on Promoting Fair Market Competition and Maintaining Normal Market Order (Guo Fa [2014] No.20), which set out 27 specific measures in seven aspects, and various departments are busy putting them into practice according to the division of duties. Meanwhile, the Office of Government Examination and Approval Reform has made active efforts to ensure that the abolishment and delegation of approval-requiring items and the intensification of in-process and post-supervision shall be studied, proposed, followed up and implemented simultaneously, so that power and responsibilities are delegated and delegation and supervision are strengthened at the same time. When the executive meeting of the State Council reviewed and passed the seventh list of 87 abolished and delegated approval-requiring items, it specified in-process and post-supervision measures for each of them. Items are not abolished or delegated hurriedly if opinions on in-process and post-supervision are not determined yet or the proposed supervision measures are too abstract to be operable. In the future, all abolished and delegated items shall be matched with in-process and post-supervision measures simultaneously, and the Office of Government Examination and Approval Reform will intensify in-process and post-supervision in certain departments and places on a trial basis at the proper time.

VI. Standardizing and improving government examination and approval management

At present, some items are faced with long approving process, tedious procedures, low efficiency and unclear and non-transparent standards. Some approvals are the precondition for each other, too much right of discretion is allowed, and some agencies provide substandard services. In sum, government examination and approval, which features long time, disorderly charge and serious monopoly, has caused a lot of difficulties and trouble for enterprises and the public. According to the State Council’s requirements, the Office of Government Examination and Approval Reform will set about solving these problems, carefully carry out pilot projects and summarize experience, with the aim to issue pertinent opinions to standardize the government examination and approval management within the year. For instance, it will continue to push the National Development and Reform Commission and the Ministry of Commerce to carry out pilot projects and explore methods, and timely summarize the experience of the Ministry of Transport and the Ministry of Agriculture in expediting the approving process and standardizing the approving services. On this basis, the Office of Government Examination and Approval Reform will study and propose the common requirements for standardizing and improving the government examination and approval for items in different fields and of different categories. At the same time, it will intensify the instruction as to how to better perform the informing obligation, improve the approving process, and standardize the approving authority and right of discretion.

VII. Strictly controlling new administrative permissions

To deepen the reform of the government examination and approval system, equal emphasis shall be placed on slashing the existing items requiring government examination and approval and strictly controlling the addition of new ones. To this end, the State Council printed and distributed the Notice on Strictly Controlling New Administrative Permissions (Guo Fa [2013] No. 39) in September last year, which strictly regulates the standards and procedures for setting up new items requiring government examination and approval . The Notice sets down specific requirements in the following three aspects.

First, rigorous standards for setting administrative permission shall be put in place. In general, no new administrative permission will be set in the draft of laws and administrative rules in the future. If new administrative permission is absolutely necessary, provisions of the Administrative Permission Law shall be strictly observed and rigorous standards shall be put in place. Apart from laws and administrative rules, no fee shall be charged for implementing administrative permission on administrative organs and for supervising and examining the permitted party’s engagement in activities requiring administrative permission. No fee shall be charged in the name of implementing administrative permission.

Second, reviewing procedures for setting administrative permission shall be standardized. If draft laws and administrative rules plan to set administrative permission, both the drafting and reviewing party shall conduct in-depth survey and study to prove its legality, necessity and rationality.

Third, supervision of setting administrative permission shall be intensified. Parties that draft the laws and administrative rules and that implement the administrative permission shall intensify tracking, evaluation, supervision and management. The Legislative Affairs Office of the State Council shall reinforce the recording and examination of departmental rules and regulations in the State Council, and any administrative permission in disguise shall be strictly dealt with and corrected.

By strictly implementing these measures, the State Council strives to tighten the valve of adding new administrative permissions, and prevent the addition of government examination and approval items while old ones are abolished and the disguised approvals imposed on out-of-list items.

VIII. Reform of local government examination and approval system

At present, local authorities have taken over the approval-requiring items delegated by State Council departments. According to local feedback, the 130 items requiring government examination and approval that are delegated by the State Council have been successively taken over at the provincial level, but few items haven’t been completely put in place yet by the prefecture- and county-level governments. Most provincial governments have demanded their directly affiliated institutions to well interface with the higher-level authorities to take over the delegated items, work out relevant plans, and specify the approving process, set down the handling time limit and standardize approval procedures for each item. This work is still under way.

The clearing out of items requiring government examination and approval has progressed fast at the local level. Some provinces have formed and publicized the catalogue of items requiring government examination and approval and all provinces have reduced such items by a large margin. Since 2013, Hebei, Liaoning, Heilongjiang and Beijing have reduced such items by 54%, 56%, 47% and 29% respectively, the “gateway” to add new items of this kind is strictly controlled everywhere, and 16 provinces have seen “zero increase” in such items. Meanwhile, the reform of industrial and commercial registration system has taken obvious effects and stimulated market vitality. 451,000 new enterprises were registered in Guangdong and Jiangsu provinces from March to May this year, which amounted to a total registered capital of RMB1.2 trillion, both marking a substantial year-on-year growth.

Local governments have made active explorations and innovations in standardizing and improving government examination and approval. Some provincial governments and most prefecture- and county-level governments have built the government examination and approval service center and publicized the approval-requiring items and relevant procedures to the public. Some places have carried out online, consolidated and joint approval, adopted the “first-person accountability” system, specified deadline for each case and made service quality commitments, with the aim to improve the approving efficiency and service level and facilitate enterprises and citizens. On the basis of district- and county-level administrative service centers, Beijing has actively built two platforms – the municipal administrative service center and the online approval platform. Heilongjiang has established the online administrative service center, whereby the approval-requiring items of 36 institutions directly affiliated to the provincial government are all handled online and supervised in a centralized way. Zhejiang has created the provincial administrative service network as a centralized working platform to handle government examination and approval items at the provincial, prefecture and county level, which also realizes online enumeration of power, exercise of power and provision of service. Hubei has established the provincial platform for joint approval of investment matters to integrate relevant approving businesses of 19 of its directly affiliated departments.

All local governments are actively exploring how to intensify in-process and post-supervision and have taken effective measures for that purpose. Zhejiang explores to establish a commitment-based access system for certain industrial investment projects, which mainly focuses on input and output, energy conservation and emission reduction and labor performance, and a rigorous fulfillment accountability system shall be put in place. Jiangsu tries to strengthen the social credit system in order to intensify in-process and post-supervision and propel citizens, legal persons and other organizations to practice good-faith operation and self-discipline. Shanghai formulated the Methods of Supervision and Inspection after Government Examination and Approval to regulate post-approval supervision, and Liaoning province printed and distributed the Opinions on Strengthening Supervision after Items Requiring Government Examination and Approval Are Abolished or Adjusted to specify the contents, measures, responsibilities and requirements of supervision.

The reform of the government examination and approval system in the past one-plus years has effectively unleashed market vitality, facilitated enterprises, stimulated social enthusiasm for investment and business startup, and promoted the continuous increase of job opportunities, winning high comments from the general public. Meanwhile, as an internal revolution of the government, the reform of government examination and approval system will be a long and on-going process of overcoming one difficulty after another. The achievements that have been made are just for the current stage and still lag far behind the central government’s requirements, the development demand and the public expectations. Following the requirements and deployments made by the CPC Central Committee and the State Council, the Office of Government Examination and Approval Reform will continue to work with various State Council departments and non-governmental parties in a proactive and down-to-earth way and pull together the wisdom of all sides, in a bid to consolidate and expand the fruits of the reform and keep releasing more dividends of the reform.