China Pilots Policy to Reduce Business Certification Requirements

Posted by Written by Joseph Percy Reading Time: 2 minutes

China’s State Council recently announced a new pilot program that will trial the practice of “pre-commitment of qualifications” in an effort to further cut red tape and improve the country’s business environment. Cuts will be made to certification requirements for a range of business activities.

The meeting, which was chaired by Premier Li Keqiang, decided on further steps to identify which certification requirements will be cut and which are strictly necessary. Relevant authorities will also streamline administrative procedures to help foster more efficient approval processes.

The policy will first be trialed in 13 regions, including Tianjin, Liaoning, Shanghai, Guangdong, Sichuan, and Shaanxi. Within these pilot regions, five ministries will be in charge of trialing the policy – the Ministry of Public Security, the Ministry of Justice, the Ministry of Human Resources and Social Security, the Ministry of Natural Resources, and the Ministry of Transport.

How it works

Under the pre-commitment of qualifications pilot, government departments must notify applicants of the specific certification requirements for the permit or other item for which they are applying.

Applicants then sign a pledge stating that they have obtained all the certification requirements.

The applicant, however, will generally not be required to hand the documentation to the department to obtain approval in advance of beginning operations. Rather, the pledge is legally binding and will have consequences if it is revealed the applicant has been untruthful.

In effect, the reform changes certain certifications from a pre-approval system to a self-declaration one.

Authorities hope that the system will streamline administrative processes by cutting application bottlenecks and wait times, while leading to a greater regulatory focus on ongoing monitoring.

The reform is intended to work in tandem with the social credit system – a national reputation system to standardize the assessment of citizens’ and businesses’ economic and social reputations and transgressions. A database of applicants’ credit information will be set up, and those that make untruthful certification claims will be penalized or blacklisted.

Ongoing efforts to improve the business environment

The State Council noted that the policy fits into a wider range of efforts to improve China’s business environment as the economy faces a slowdown.

Practices that prove to work well in the pilot areas are intended for nation-wide implementation in the future.

China has been undertaking a multi-year campaign to execute a number of individually small but collectively impactful administrative streamlining measures to improve the business environment.

For example, over the past several years China has been implementing a similar reform to shift CIT tax incentive claims from pre-approval to self-declaration. Reforms such as these have contributed to China rapidly climbing the World Bank’s ease of doing business rankings year-on-year.

China’s economic planners hope that improving the business environment will improve its attractiveness as an investment destination and lead to increased economic gains along the margins as its economy slows.

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