Govt announces cut in red tape

Move aimed at bolstering economic vitality

The State Council announced on Monday a further cut in red tape and administrative approval processes in order to let the market play a greater role, including lifting the qualification requirements for IPO sponsors.

A total of 58 administrative approval processes will be lifted, and 67 employment requirements will be changed.

Eight of the 58 administrative approval processes to be removed are connected to the China Securities Regulatory Commission (CSRC), including lifting of the requirement for custodian banks for foreign qualified institutional investors to be endorsed by the CSRC.

The requirement for CSRC approval of any change of location by securities and futures brokerage firms will also be removed.

Barriers to certain occupations will be lifted as well. Among the 67 employment qualifications to be removed are those for IPO sponsors, who are responsible for the authenticity, accuracy and completeness of a company's IPO prospectus.

Removal of the IPO sponsor qualifications is aimed at creating a simplified IPO registration system, which is part of an overhaul of the existing CSRC approval mechanism, Liu Xiao, a senior analyst at Beijing-based Anbound Consulting, told the Global Times on Monday.

There is currently a long waiting list for companies hoping to go public, partly because of the CSRC's relatively slow review and approval process.

Under China's existing rules, an IPO must be endorsed by a qualified individual known as a sponsor, most often an investment banker who possesses years of professional experience and has passed exams organized by the securities regulator.

The qualifications for an IPO sponsor are regarded as being difficult to obtain. Critics also say that the sponsor system can create potential conflicts of interest and abuse of power, given the high fees involved for this part of the IPO process.

"Cutting administrative processes and government intervention is aimed at spurring the vitality of the market, which is vitally important for economic growth," Zhang Zhanbin, a professor at the Chinese Academy of Governance, told the Global Times on Monday.

China's economy is facing downward pressure as it goes through a restructuring process. Removal of the employment qualifications will be good news for the labor market as it will make it easier for people to find jobs, Zhang said.

Premier Li Keqiang said in March 2013 when he took office that there were 1,700 administrative approval processes, and that the new government planned to cut about one-third of them during this term.

The central government has already achieved this target, by scrapping more than 600 of the 1,700 items.

However, the majority of the items that have been abolished are not at the core of government intervention in the market, such as project approval by the National Development and Reform Commission (NDRC), the country's top economic planner, Liu said.

The NDRC said in a press conference on November 18 that it had removed 44 review and approval processes since 2013, as well as twice amending the investment list and cutting the number of investment approval processes by 76 percent.

It has also devolved certain powers to local authorities.

The China (Shanghai) Pilot Free Trade Zone, a testing ground for China's economic reforms, operates a "negative list" model for investment, which grants foreign investors free market access to all areas or fields that are not on the list.

The Shanghai municipal government reduced the number of items on the negative list by nearly one-third in June from the previous version released on its establishment in September 2013.

The country also plans to expand this negative list model nationwide at some point in the future.

In October, the Ministry of Commerce also enacted a revised regulation creating a system for outbound investment based on registration rather than approval.