China will fully roll out the reform of decoupling business licenses from operation permits in its pilot free trade zones (FTZ) nationwide starting Dec 1, reducing the permitting requirements and simplifying the review process under all 523 items concerning business operations subject to central government approval, in an effort to create a world-class and market-oriented business environment governed by a sound legal framework, and promote employment, the State Council’s executive meeting chaired by Premier Li Keqiang decided on Aug 21.

The Chinese government puts great emphasis on the reform of decoupling business licenses and operation permits. General Secretary Xi Jinping said it is important to significantly scale back government-directed allocation of resources and stressed the need for continued vigorous efforts in streamlining regulatory requirements, delegating powers and enhancing compliance oversight to allow the market and companies sufficient space for playing their due roles. Premier Li Keqiang emphasized that this year, the reform of decoupling business licenses and operation permits will cover all government approval items relating to business operations with the view to making it easier for companies to get business licenses and start operations as quickly as possible, thus putting an end to the phenomenon of firms being up but not actually running.

“The reform of decoupling business licenses and operation permits is an important step in transforming government functions and improving the business environment. This ever-deepening reform in recent years has played a crucial role in energizing the market, unlocking people’s creativity, and tackling the downward economic pressure in a shifting external environment,” Premier Li said.

The reform of decoupling business licenses and operation permits, building on the reform of the business system, is an important measure in seeing that companies take ownership in their operation decisions and the government live up to its responsibility of compliance oversight. Since the State Council made the decision in 2015, the reform, first piloted in the Pudong New Area in Shanghai, has been rolled out across the country. This effort has effectively improved the business environment and boosted market vitality. Between November 2018 and June 2019, more than 2.9 million companies benefited from the reform.

As part of the decision made at the meeting, the review requirement of 13 items, including record-filing and registration by foreign trade operators, will be abolished.

The review requirement of eight items, including registration of customs broker corporations, will be replaced by record-filing.

The review requirement of 60 items, including human resources services permits, will be replaced by pre-commitment of compliance.

For the remaining 442 items, services will be improved by cutting documentation requirements, providing faster, online processing, extending or scrapping the validity period and abolishing on-site verifications.

All these measures will be included in the reform list, released to the public and adjusted in due course.

“Our market entry threshold is still quite high. Companies with business licenses yet without required permits cannot actually operate. And permit requirements still abound. These are the reasons that firms may be up yet not actually running,” Premier Li said. “This round of reform in the pilot FTZs is only the first step. Going forward, we will pursue the reform at a faster pace and expand its coverage. The goal is to level the playing field and create a world-class, market-oriented and more enabling business environment governed by a sound legal framework where all types of market players are treated as equals. The delegation of government powers must help ensure fairness.”

It was decided at the meeting that implementation of related administrative regulations and State Council decisions in FTZs will be temporarily adjusted. The State Council will seek mandates from the Standing Committee of the National People's Congress for any adjustments in enforcing the laws concerned.

“The government must strengthen impartial regulations and intensify compliance oversight and keep reforming and innovating the regulatory means to provide safeguards for the reform. Government oversight should run in sync with and be part and parcel of government services,” Premier Li said.