Over the years, China’s governmental procedures for the incorporation of companies and corporate administration have been simplified to accelerate and strengthen doing business in China. Despite the onslaught of COVID-19 and its economic effects, the objective of optimising the business environment for both domestic and foreign companies in China remains unchanged. If fact, the State Council has further encouraged provincial and municipal governments (“Local Governments”) to make optimisation of the business environment a priority nationwide.
In a recent State Council executive meeting held 24 June 2020, Premier Li Keqiang presented a series of key directives intended to maintain market players towards easing and optimising the business environment. To this end, Premier Li firstly called upon local Governments to:
- “Relieve corporate burdens by strengthening government support”
- “Simplify, decentralise and optimise services”
- “Reform regulations”
- Extract potential from business environment optimisation
- Further stimulate market vitality
Secondly, Premier Li explained that market players shall take a prominent position, to reaffirm the “six stabilities” (六稳) and implement the “six guarantees” (六保)[1], which were outlined 17 April 2020[2], and ensure people’s employment and necessary livelihood. Lastly, Local Governments are called upon to reduce burdens for market players, allowing existing market players to maintain their course, and new market players to continuously emerge to drive market vitality.
What’s more, during the State Council executive meeting, the members determined two key points for optimising the business environment and called upon Local Government to move to implement the points. Firstly, Local Governments must shorten the time length for incorporation and corporate-related procedures to 5-4 working days or less through efficient coordination between online and offline procedures. Specifically, provincial and municipal governments across China shall thoroughly enhance the business ecosystem, ensuring both online one-stop service and one form completion are coordinated with offline one window submission and singular collection. Equally, digitalisation shall be encouraged through the use of the electronic business license and electronic corporate seals as corporate verification and digital signature when conducting online business registration, tax, social insurance registration and bank account registration. As a result, the procedure flow stands smooth and efficient without interruptions.
Secondly, Local Governments are called to ease burdens and protect enterprises by reducing administrative and service fees related to natural monopoly. In practice, “Five Prohibited Practices” was defined during the State Council executive meeting to crack down on and regulate fees related to industry associations and chambers of commerce (“Associations”). Specifically, the “Five Prohibited Practices” target Associations who continuously “overpromise” without results, thus thwarting market fairness and misleading enterprise expectations. The “Five Prohibited Practices” hold that Associations are:
- Prohibited to compel companies and charge fees by government departments reliance or industry influence
- Prohibited to charge fees by exploiting legal duty and government entrusted authorisation
- Prohibited to charge fees through appraisal and recognition activities.
- Prohibited to charge fees through establishing irregular professional qualifications for corporations
- Prohibited to charge fees without providing services or continuously applying fees
The effects of COVID-19 have resulted in many corporations facing economic difficulties both in China and abroad this year. Therefore, Premier Li reaffirmed that Local Governments shall offload burdens from market players, and more specifically “what is articulated shall be reflected in government action”. For enterprises, the State Council executive meeting lead by Premier Li paves the way to real practical changes for the streamlining of business procedures and protection of business from unlawful practices, ultimately, accelerating a pro-business environment for both domestic and foreign business in China.
[1] “Six Stabilities” refers to micro policies to stabilise employment, finance, foreign trade, foreign investment, investment expectations. The “Six Stabilities” were set forth in the Politburo of the Central Committee of the Communist Party of China in August 2018. The “Six Guarantees” refers to micro policies to guarantee residents’ employment, basic people’s livelihood, market participants, food and energy security, supply chain stability and grassroots operations.
[2] The Politburo of the Central Committee of the Communist Party of China held a meeting on April 17 to analyse the situation of prevention and control of the novel coronavirus epidemic at home and abroad. Within the meeting, the “Six Guarantees” goals were set forth to increase the “Six Stabilities”.
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