China Addresses Administrative Market Barriers

China's National Development and Reform Commission (NDRC) recently issued 18 cases of local governments creating market barriers to curb competition, and stated that it will continue working with other agencies and third-parties to launch investigations to ensure the negative list system is fully implemented.

The NDRC announcement, No. 1670 of 2021  (国家发展改革委关于建立违背市场准入负面清单案例归集和通报制度的通知) (link in Chinese), aims at "fully and deeply implement[ing] the market access negative list system." China's negative list of market access is a catalog of sectors that are either restricted or prohibited for all market players, including domestic and foreign, to participate in. Sectors on the restricted list are usually subject to administrative approval. China also has a separate negative list dedicated to foreign investment.

According to the notice, the NDRC, along with other agencies, will  conduct investigations on violations of the negative list, and regularly circulate typical cases and investigation findings on the NDRC website and CreditChina website.

Typical violations of the market access negative list that will be notified include local governments allowing market access in the sectors that are on the negative list or setting up hidden barriers to curb market access. In the latter situation, local authorities may be considered to have created hidden barriers if they impose approval requirements for sectors "that have been liberalized at the national level", or add "restrictive conditions for market access," or do not issue licenses due to "lack of regulatory capabilities," or create administrative approval requirements that are inherently impossible to fulfill, or require repetitive licensing.

In the first list of typical cases published alongside of the notice, the NDRC described 18 cases in Guangdong (2 cases), Anhui (2 cases), Fujian (3 cases), Yunnan (2 cases), Gansu, Hebei (2 cases), Henan (2 cases), Shanghai, Ningxia, Jiangxi, and Sichuan. Some of the cases involved local governments adding market barriers in government procurement and licensing activities to exclude and eliminate competition. Other cases related to inefficient licensing as well as illegal administrative charges. Violations in all 18 cases have been rectified, according to the document.

The notice also requires provincial-level governments to improve the system to evaluate the implementation of the market access negative list.

In October, China issued the 2021 negative list for public comments. Compared to the list from last year, the proposal relaxed the restrictions in some sectors but tightened restrictions in others, such as news media, education, and virtual currency mining.