China's reform of decoupling business licenses and operation permits to be fully implemented in pilot free trade zones

China will fully roll out the reform of decoupling business licenses and operation permits in its pilot free trade zones nationwide starting from December 1, reducing the permitting requirements and simplifying the reviewing processes under all the 523 items concerning business operation subject to central government approval, in an effort to create a world-class, 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 Wednesday.

"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," 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, as many as 2.942 million companies benefited from the reform.

The Wednesday meeting decided that the reform of decoupling business licenses and operation permits will be pushed forward in all pilot free trade zones starting from December 1, to reduce the permitting requirements and simplify the reviewing processes. New measures will be introduced under all the 523 items concerning business operation that are subject to central government approval:

The reviewing requirement of 13 items, including record-filing and registration by foreign trade operators, will be abolished.

The reviewing requirement of 8 items, including registration of custom broker corporations, will be replaced by record-filing.

The reviewing 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 requirement, providing faster, online processing, extending or scrapping validity period and abolishing on-site verification.

All the above-mentioned measures will be included in the all-front 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 why firms may be up yet not actually running," Li said.

"This round of reform in the pilot free trade zones 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 actors are treated as equals. The delegation of government powers must help ensure fairness," Li said.

It was decided at the meeting that implementation of relevant administrative regulations and State Council decisions in the free trade zones will be temporarily adjusted. The State Council will seek mandate from the Standing Committee of the National People's Congress for any adjustment in enforcing the laws concerned.

"The government must strengthen impartial regulation 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," Li said.