Government to Cut Trade Sector Red Tape to Benefit All Markets

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Last updated at: (Beijing Time) Friday, March 07, 2003

Government to Cut Trade Sector Red Tape to Benefit All Markets

Experts said streamlining administration processes in the trade sector and establishing a banking regulatory body is both necessary and in line with China's goal to develop a more mature market.

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Experts said streamlining administration processes in the trade sector and establishing a banking regulatory body is both necessary and in line with China's goal to develop a more mature market.

The move to put importing, exporting and internal trade under the administration of a single ministry, the proposed Ministry of Commerce, will enhance efficiency for both businesses and administrators, said Li Yushi, deputy director of the Chinese Institute of International Trade and Economic Co-operation, a think tank of the Ministry of Foreign Trade of Economic Co-operation (MOFTEC).

The new Ministry of Commerce will combine MOFTEC with departments in charge of domestic and foreign trade in the State Development Planning Commission (SDPC) and the State Economic and Trade Commission (SETC).

With the establishment of the Ministry of Commerce, companies involved in trade would no longer have to run between different government branches, as they do under the existing system.

Further, the system would allow the central government a clearer and more comprehensive view of both the domestic market and overseas markets, facilitating a holistic approach to administrating the sector, Li said.

"It will make things easier for everybody (who is involved in the industry)," he said. "It also addresses new needs which have developed since China entered the World Trade Organization."

China's domestic and foreign trade was administrated by a sole department at the founding of the People's Republic of China and was separated in 1952 under the planned economy system.

The duty of import administration was then distributed to a spate of ministries responsible for different sectors.

The framework of that system was maintained till now. MOFTEC was mainly responsible for administrating exports but the function of administrating imports has been shared by several departments within MOFTEC, SDPC and SETC.

Internal trade also falls under the control of SETC.

For example, importing equipment for technical renovation must get approval from SETC, and imports for major projects by SDPC.

The negative side of such a fragmented administration system has become increasingly obvious in recent years, said Lu Jinyong, a professor at the University of International Business and Economics.

For example, importing raw materials for processing and resale has become an important sector in China's foreign trade, yet with imports and exports administrated by different ministries, the efficiency of such companies is greatly reduced, he said.

"I fully support the establishment of the Ministry of Commerce," Lu said.

Wei Jianing, a senior economist with the State Council Development Research Centre, said the establishment of the China Banking Regulatory Commission would help resolve the problem of conflicting roles of the People's Bank of China (PBOC).

The PBOC is now responsible for both drafting and implementing monetary policy and supervising commercial banks.

Monetary policy should be short-term, which should be adjusted frequently to exert influence on the economy, but banking regulation policy should be stable and safeguard the health of the banks, Wei said.

It is very difficult to effectively fulfill the two tasks at the same time, he said.

For example, when the central government feels the need to have a relatively relaxed monetary policy, it is very likely that the supervision of commercial banks' activities would also be loosened to meet the goal of a more rapid money supply.

Such a situation, Wei said, would lead to extra financial risks.

With the establishment of the banking regulatory commission, the two tasks would be separated and this would be conducive to both monetary policy formation and implementation and bank regulation, he said. (China Daily News)

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