Public input a necessary element of transparency
The mainland is in the midst of a transition from a planned economy to one that lets market forces reign. It is a reflection of the muddiness of this transitional state that there is a law requiring state monopolies to conduct public hearings to gauge the views of the masses on their pricing policy. In a fully developed market economy, with many players and no barriers to entry to any industry, supply and demand determine the prices of goods and services and there is little need for pricing policies. But, as is the case in the mainland, when a few state-owned behemoths still run the railways, airlines and telephone networks, price controls are necessary to control monopoly power.
Reflecting the nation's political conditions, however, the way the hearings are conducted can only be described as uniquely Chinese. Rather than allowing anyone who wants to be heard to air his views, only designated representatives are given the opportunity, giving bureaucrats the prerogative to choose what they want to hear. Indeed, when the first such hearing, on railway fares, was held in January last year, there was criticism that the hand-picked representatives were chosen for their palatable views to the authorities, not their understanding of the needs of railway users.
The State Development and Reform Commission is trying to fix that problem and has promulgated a set of rules to ensure the selected delegates are representative of various sectors, including business operators, consumer groups, relevant government departments and qualified professionals and experts. The rules' effectiveness in allowing the people's views to be heard will be tested in a public hearing on air fares next week.
Compliance with the law remains a problem. Last year, in what was regarded as a bid to make its US$3.68 billion initial public offering more attractive, China Telecom persuaded the Ministry of Information Industry to approve a steep rise in inter-connection fees. It was announced without consultation and no public hearing was conducted. Although it was later withdrawn, the price law has not been invoked against any of the parties.
Still, requiring open hearings on pricing is a giant step forward in increasing the transparency of policymaking on the mainland. Gone are the days when the authorities could simply dictate prices without consulting the people - when only the views of organised stakeholders who had eyes and ears in the corridors of power were heard.
Placating these stakeholders remains important. In many countries with a much longer history of public consultation, well-established processes help regulators give due weight to views of interest groups and community organisations. The mainland would do well to learn from international practice and experience.