China issues new guideline to cut business red tape

Guidelines to rein in excessive administrative inspections of enterprises have been published by the Chinese government, as part of the country’s efforts to improve the business climate and bolster confidence among private firms.

Analysts said that arbitrary fines and forfeitures, out-of-jurisdiction enforcement, maximum penalties, which have long been a source of frustration for businesses, should be addressed head-on to create a level playing field.

“Administrative inspections are crucial for government agencies to guide businesses toward lawful operations. However, some localities and departments have been engaging in arbitrary behaviours while conducting such inspections, causing disruptions to enterprises,” according to a statement issued by the State Council, the country’s Cabinet, at the end of 2024.

Zhao Peng, director of the School of Law-based Government, which is part of the China University of Political Science and Law, cited the case of a natural gas transmission company in Shandong province which has had more than 100 inspections annually from 2021 to 2023. China’s Ministry of Justice in November confirmed this, saying the inspections were conducted by various government agencies, including those responsible for safety, across provincial, municipal, county and township levels.

“The sheer volume of inspections faced by this natural gas company is truly staggering, and it speaks to a larger systemic issue where enterprises are being overburdened by arbitrary enforcement practices,” Zhao said.

“The key is finding a sweet spot where the government provides necessary regulatory oversight, but also respects the autonomy and rights of enterprises. This is not an easy balance to strike, but is essential for unleashing the full potential of China’s vibrant private sector.”

To this end, the frequency and intensity of government inspections must be carefully calibrated, so as to eliminate excessive interference, while also ensuring that targeted regulatory functions are not neglected, according to the guidelines.

The key requirements include clearly identifying the government agencies responsible for conducting these inspections and streamlining the list of inspection items. Meanwhile, government agencies should adhere to strict standards and procedures when carrying out inspections, and scale back the frequency of on-site visits to businesses, the guidelines say.

“The goal here is to establish clear boundaries and procedures for administrative inspections, eliminating the potential for abuse and enhancing predictability in the regulatory environment,” said Zhu Lijia, a professor at the National Academy of Governance.

The new guidelines come after the government’s recent emphasis on non-tax revenue growth – including fines and confiscations, as well as returns on State-owned assets and capital – caught the attention of the market due to its potential risks to the overall business environment and market sentiment.

In the first 11 months of last year, non-tax revenue climbed 17% year-on-year to about 3.7 trillion yuan ($507 billion), while tax revenue declined 3.9% year-on-year to 16.19 trillion yuan, figures from the Ministry of Finance showed.

“We cannot simply assume that the rapid growth in penalty and confiscation-related revenues is synonymous with profit-driven law enforcement,” said Xu Hongcai, deputy head of the financial and economic affairs committee of the National People’s Congress.

“However, it is clear that in recent years, some local authorities have been aggressive in their approach, prioritizing revenue generation over fair and responsible enforcement practices,” Xu said.

Government to roll out support for consumer trade-in schemes

China will significantly increase the issuance of ultra-long treasury bonds in 2025 to support the implementation of large-scale equipment upgrades and consumer goods trade-in programme, according to a recent government press conference.

Yuan Da, deputy secretary-general of the National Development and Reform Commission, said the government would expand the scope of areas eligible for funding support. Consumers will receive subsidies to purchase three categories of digital products: mobile phones, tablets, and smartwatches and wristbands.

The official said that the government will further increase subsidies for upgrading new energy city buses, batteries, and agricultural machinery and strengthen support for renewing home decoration-related consumer goods.

In March 2024, the government launched an action plan to promote large-scale equipment renewal and trade-in of consumer goods as part of efforts to boost domestic demand and support economic growth.

Yuan said that over the past year, work related to these programmes has effectively shored up investment, boosted household consumption and accelerated the green transition.