Key problem blocking move to free-market economy not tackled

PUBLISHED : Friday, 31 August, 2007, 12:00am
UPDATED : Friday, 31 August, 2007, 12:00am

Analysts say fundamental questions remain unanswered about the Anti-monopoly Law approved yesterday.

'The law only provides a legal framework to promote competition and prohibit monopolistic activities, while leaving details to related regulations,' said Professor Wang Weiguo , dean of the school of civil, commercial and economic law at the China University of Political Science and Law.

Zeng Junping , president of the public finance department at the Shanghai University of Finance and Economics, said the law failed to clearly ban administrative monopoly by state-owned companies - the key problem hampering the development of a free-market economy.

The law bans monopolistic agreements and practices, such as cartels and price-fixing, but allows for monopolies authorised by state organs for security and economic reasons.

While reformers in the government have been keen to pass the law, the protracted debate illustrates the power that the many state monopolies and oligopolies wield.

Professor Wang said state monopolies should only be allowed on the basis of public interest. He said the law was a compromise between government agencies with vested interests.

'It should be used to tackle the dominance of state-owned businesses,' he said, pointing out that the economy was a unique hybrid of planned and market elements.

Beijing-based commercial lawyer Tao Jingzhou said: 'Administrative monopolies create invisible barriers for investment in the local economy. The law provides no sanctions and is toothless to deal with such situations.'

But Professor Wang said things must be taken one step at a time.

'Administrative monopoly is a Chinese characteristic,' he said.

Another sore point that delayed the law was which agency should execute anti-monopoly measures, and doubts remain despite the establishment of an anti-monopoly commission under the State Council.

'The body, and the maintenance of the status quo, is a reason for different parties to come to agreement on the current law,' said anti-monopoly law expert Yan Yiming .

Concerns had also been raised about the law's mandatory requirement to screen foreign acquisitions on national security grounds.

'This is a criterion that will be subject to future interpretation,' said Mr Tao, who did not think the law would put a damper on foreign investment.