The article is written by He Dexu, deputy director of Finance & Trade Institution with Chinese Academy of Social Sciences

As a matter of fact, many departments have the rights to supervise over the investment activities of enterprises. Therefore, in some places, the government supervisory and relevant departments for supervision over investment might use the power in hand to impose intervention on enterprise investment in the name of "supervision, examination and administration".

Possible eruption of new problems

The "Decision of State Council on Investment System Reform" will be conducive to the fundamental solution of some deep-rooted contradictions in China's investment field, and therefore, it is good for strengthening and improving the macro-control work. But this is also of extreme importance for promoting the national economy to develop in a sustainable, speedy and healthy way.

However, we should also be able to sense that in the course of implementation of the "decision" there still may crop up some new contractions and problems.

The first is that in some places the right of enterprises for investment may be difficult to get implemented and the status of enterprises as principal body of investment will also be difficult to get guaranteed. Although the "decision" has declared a special emphasis, no area or department should have the right to put aside or cut away the right of enterprises in deciding the investment. Yet due to the fact that departments of land and resources, environment protection, city planning, quality monitoring and examination, banking business supervision, securities supervision, foreign exchange management, industrial and commercial administration and those for controlling the safety production, all have the right to supervise over the investment activities, and so the administrative and relevant departments of the governments might use the power in hand to intervene the enterprise investment in the name of supervision, examination and administration".

The second is the obvious retardation in the reform of financing system that is directly related to and even entirely inseparable from the investment system. The banking system, especially the restrictive mechanism for the state-owned commercial banks hasn't been truly established so far and there is no developed capital market. All these may spell an influence on the effect of the investment system reform.

The third is that in some places, by flaunting the huge color for strengthening the macro-control on investment there appeared some such new organizations as city-planing commission, office for key industrial projects, investment service center, leading group for land planning and operation and joint examination leading group for project planning and so on and so forth. Every organization might be a very tough "mother-in-law" and possible to use the power in hand to intervene the normal investments of enterprises.

The fourth is that the "decision" remains so far a basic framework for the investment system reform and it's absolutely necessary to work out rules and regulations in detail to make the procedures practicable.

Multifarious ways used for the implementation of investment system reform

To fully implement the requirements of the "decision" and to make the investment system reform actually workable, efforts are to be made as suggested in the following aspects:

First: forceful measures are to be taken to ensure that the "decision" be thoroughly executed and made workable, putting an end to the occurrence of behaviors as such "the lower levels have means and ways to deal with the policies from the above".

Secondly, it needs to coordinate well the relations of the relevant areas and departments.

Thirdly, pay attention to improving the reform in relation to the reform of investment system, including the transfer of government functions and actively push ahead the reform of financial system. This is not only for a stable supply of funds from various channels for the principal body of investment but also for providing the investment with a monitoring and supervisory mechanism so that it is able to regulate and restrict the investment behavior of bodies for investment in prevention of investment risk; Boldness must be exercised in the exploration for an effective, incentive and restrictive mechanism operation for the state-owned enterprises in order to restructure and transform them in a regulated way, and a social consultancy and service system for investment projects must get standardized and developed, and cultivate and improve the brokerage system adaptable to the marketization of the investment system.

Fourthly, if conditions are permissible it may be possible to simplify and press down by and by the "catalogue of investment items approved by the government", diminish the scope of the "catalogue".

Fifthly, because of the "the method for the execution of filing on record system is worked out by each provincial government itself" the departments for investment control of the State Council should strengthen their guidance and supervision on the work of filing, so as to standardize the administrative behavior of local governments and prevent from the altered forms of approval in the name of filing. This is what the enterprises are mostly worried of and concerned with.

And lastly, to have the "decision" further broken up into details and work out so soon as possible relevant rules and regulations in detail for the implementation of them. For example, as regulated in the "decision" "the job of a government as regards the approval of enterprise application for project is mainly for maintaining the safety of economy, reasonable development and exploitation of resources, protection of ecological environment, optimization for the layout of key projects, guaranteeing the public interests and prevention of occurrence of monopoly, etc.". However, the measurement on all these aspects has to be implemented more explicitly and in a detailed way.

Article from the People's Daily and translated by People's Daily Online