At the start of this month, the Ministry of Commerce (MOFCOM) extended the deadline for dismantling regional economic barriers to the end of June after inspections found the previous one had not been met, according to the April 11 issue of Oriental Outlook.
The initial time limit was set in a joint circular issued last year by MOFCOM, the State Council's Legal Affairs Office (LAO), the ministries of finance, supervision and communications, the State Administration of Taxation and the General Administration of Quality Supervision, Inspection and Quarantine.
The aim was to remove administrative barriers, market segmentation and obstruction of fair competition between provinces. It targeted policies that directly or indirectly excluded or restricted external commodities from local markets and vice versa.
All provinces were required to submit a summary report on their progress in clearing barriers to MOFCOM and the LAO by the end of January.
Though there had been progress in some provinces, the success of the initiative varied widely, according to MOFCOM, with the majority of provinces failing to publish the results of barrier removal or provide necessary data.
An inspection group jointly organized by the above seven departments suggested prolonging the deadline to the end of June and focusing on the clearing work on a city and county level.
MOFCOM issued a second circular at the beginning of this month, asking all provinces to break all regional economic blockades before the end of June.
One anonymous expert told Oriental Outlook that the delay was due to some local governments' resentment toward the reform.
Regional blockades not only form a major obstruction to an integrated national market but also greatly restrict competition, causing low-level redundant construction and serious waste of resources, Jin Zhiguo, president of Tsingtao Brewery Co. Ltd, told Oriental Outlook.
He said they are the result of the de facto regional protectionism adopted by many local governments for regional political and economic interests.
The government has been trying to remove regional barriers and establish an integrated national market since 1980, when the State Council published the Interim Provisions on Promoting and Protecting Competition.
Though barriers have lessened since then, they still exist in various forms and degrees and have taken on some new traits, said Zhou Weilin, professor at Fudan University's China Center for Economic Studies.
Regional blockades have transformed into local regulations and technical, quality and environmental criteria that favor local enterprises and exclude outside ones, said Zhou.
He said some local legislation seems to protect the legal interests of the public but local governments adopt double criteria during implementation, turning a blind eye to local enterprises while restricting those from elsewhere.
Though regional blockades are incompatible with the market economy, trying to break them in one move will also do no good, as China's economy is in a transitional period and regional blockades have rooted historical reasons, some experts say.
Zhou said regional blockades expose the contradiction between partial and overall interests and between local and national interests. In some regions, especially underdeveloped ones, local governments have concerns over financial revenues and employment. Once the blockades are broken and the market is fully open, many local enterprises will go bankrupt through competition, resulting in increasing unemployment and even impairing social stability.
A cushion period is necessary for clearing regional blockades, said Zhou, stressing that without developed mechanisms competition in an open market would put local enterprises in a tight spot.
Administrative monopoly is the most important reason for regional blockades and is the most influential and harmful in confining competition. Therefore, establishing and perfecting a legal system centered on anti-monopoly law is most important for an integrated national market, said Wang Yehua, researcher at the Chinese Academy of Social Sciences' Institute of Legal Studies.
An anti-monopoly law is currently under examination.
(Oriental Outlook, translated by Yuan Fang for China.org.cn, April 27, 2005)
