This content is from: Local Insights

China

In a move meant to reform the granting of licensing rights, the National People's Congress has promulgated the Administrative Licensing Law, effective July 1 2004.

Administrative licensing refers to granting permission for individuals and corporations to engage in special activities. These activities, typically business-related, range anywhere from importing equipment to opening a retail market.

Licensing has been a major government function exercised at all levels. However, licensing powers were often abused, leading to inequality, over-elaborate procedures, kickbacks and inefficiency.

The new law simplifies an administrative licence grant in several ways, including the following:

  • significantly limiting the ability of local authorities to institute licensing systems;
  • making licences unnecessary for matters that (i) individuals or companies can decide themselves; (ii) can be effectively regulated by market competition; or (iii) are the subject of self-regulation; and
  • setting forth time limits in which an approval authority must approve the licence application.

The law contains many other notable features as well, such as non-discrimination principles, creating certain public hearing procedures and establishing legal liabilities for authorities violating the law.

The licensing law was promulgated on August 27 2003. Since then, government bodies have been busily preparing for enforcement, including requiring civil servants at all levels to take exams on the law and striking from its lists hundreds of activities that previously required licensing.

The real test, however, began on July 1 2004 when approval bodies became required to put the law into action. Naturally, many of the contours of the new law are unclear, such as when it is necessary for an activity to be licensed (although it is expected that the State Council will release a list of items that need licensing). Nonetheless, the law is expected to bring far-reaching changes, and is certainly a welcome step in creating a more transparent and equitable licensing regime.

Richard Yee

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