Chapter One    Government Administration

 

Being a member of the WTO which is a rule and regulation-based organization, China has to make sure that its domestic economy is regulated in ways that correspond to the need of a modern market economy. Shanghai, as a frontrunner of the opening-up process in China, has been bent on establishing a legal framework governing local administration as part of the efforts to implement China’s WTO commitments.

 

I.                   Improving the Legal System and Standardizing Administrative Behavior

Since 2003, China has adopted three administrative regulations, namely Administrative Licensing Law of the PRC, Sino-foreign Cooperation in Running Schools Regulation of the PRC, and Certification and Accreditation Regulation of the PRC. Laws and regulations which are being or have been made or revised include: PRC Commercial Banking Law, Foreign Trade Law of the PRC, Regulations on Import and Export Duties of the PRC, PRC Regulations on Customs Protection of Intellectual Property Rights, Rules of Origin for Exports & Imports of the  PRC, etc.

 

Through the above efforts, China has gradually improved and adjusted the legal systems governing such areas as Import and export, Customs, Commodities Inspection, Financial Services, Telecommunications Services, Audio-visual and Publication Services, Tourism, Maritime Transportation Services. Besides, implementation procedures have been adopted accordingly, which has greatly enhanced uniformity and transparency in the implementation of these administrative regulations.

 

In compliance with the requirements of the Central Government, the Municipal Government of Shanghai has combed through its local rules, regulations and policies, resulting in the revision of 24 local rules and regulations. In particular, efforts have been made to straighten up local administrative rules and policies governing administrative licensing since the adoption of the new law. Such efforts involve making concrete rules governing the charges for administrative licensing and laying out detailed working plans. The results have been duly released to the public.

 

II.                Promoting Transparency and Democracy in the Legislation Process

China’s entry into the WTO has produced a catalytic effect on the promotion of legislation and democracy in Shanghai. In order to get more people involved in the legislation process, a number of new measures have been taken in Shanghai in 2003.

 

First, the Observation System has been launched for the meetings of the Shanghai People’s Congress Standing Committee. The introduction of the System reflects a crucial change towards a better system and improved socialist democracy. The first group of 15 citizens, invited by the Office of the Shanghai Peoples’ Congress Standing Committee, observed the 8^th Session of the Standing Committee of the 12^th Shanghai People’s Congress. This is the first time in the history of Shanghai that ordinary people could sit at the Standing Committee Meeting through application. Although the observing group have no right to speak or vote, they are allowed to submit their comments or suggestions in writing to the Standing Committee Office after the meeting.

 

Second, starting from 2003, the government of Shanghai has tried to solicit public opinions towards the legislative items of great concern to the public by publishing the draft versions of related documents in the media. This measure is expected to ensure the quality of legislation through enhanced public participation in the legislation process. Following are examples demonstrating the local government’s effort in this respect:

 

On May 19, 2003, the Shanghai Municipal Government issued a notice seeking public opinion on Shanghai Tourism Regulation, which had been drafted. At the same time, the draft version of the new regulation was made public on the Official Website of Shanghai Municipality, Shanghai Legal Daily and Traveling Times.

 

From July 4 through July 25, 2003, the draft version of Measures Governing the Prevention of Environmental Pollution in Catering Services was made public in newspapers and on the Official Website of Shanghai Municipality.

 

From October 24 through November 7, 2003, the draft version of Open Government Information Regulation of Shanghai Municipal Government was made public in Jiefang Daily, Shanghai Legal Daily and on the Official Website of Shanghai Municipality. Relevant news was released through Youth Daily and Oriental Express, calling for public response to the draft regulation.

 

III.             Establishing an Open Government Information System

To further promote government transparency and easy access to administrative information, Shanghai started to work on the legislation for an open government information system immediately after China’s accession to the WTO. As a result, Open Government Information Regulation of Shanghai Municipal Government was formulated in 2003 and the draft version of the regulation was made public in Jiefang Daily, Shanghai Legal Daily and on the Official Website of Shanghai Municipality so as to invite public opinion.

 

The above regulation was promulgated on January 20, 2004, effective as of May 1, 2004. It covers the scope of information, forms and procedures for the disclosure of information, relevant supervision and safeguard measures, legal responsibilities and remedies involved, etc.

 

IV.            Deepening the Reform on Administrative Examination and Approval System

In response to the State Council’s resolutions (on 3 occasions) to call off items for administrative examination and approval, Shanghai has continued its efforts to reform the administrative examination and approval system so as to transform the government functions and establish an administrative regulation system that is in harmony with the development of the socialist market economy. These efforts are:

 

1.                              calling off administrative charges for the items that still require examination and approval;

2.                              ensuring smooth implementation of the third resolution, laying down effective regulatory measures on certain issues where such regulation is still desirable, and monitoring the progress of the issues for which administrative examination and approval has been called off or adjusted;

3.                              encouraging the Pudong New Area to improve administrative regulation by searching for innovative practices of examination and approval, improving the management and service for organizations and establishing credit system; allowing the New Area to conduct examination and approval on a trial basis; pinning the District Government down to the Notification Commitment of  5 outstanding projects;

4.                              granting the Changning District Government right to reform the examination of construction projects on a trial basis by providing support in researching and planning so that some long-standing problems be solved;

5.                              helping Minhang District improve the administrative procedure through trial examination and approval of selected projects involving social affairs that are the constant subjects for examination;

6.                              singling out and analyzing cases where organizations are being found imposing administrative charges and conducting a special investigation on administrative charges;

7.                              improving the ‘joint examination and approval’ system for company establishment by streamlining all required preliminary examination and approval procedures; enhancing the regulation of ‘joint examination and approval’ system by defining the responsible personnel and department, time frame and procedure, and ensuring consistency within the joint system;

8.                              launching an annual compulsory inspection system for all districts and counties administrative agencies in which same time and location is required, and promoting an annual reporting system or online inspection system for industries and businesses.

     During the reform, Shanghai has given full attention to foreign-invested enterprises, making sure that those firms receive national treatment. For instance, Shanghai has lowered the rate regarding 6 administrative charges: a) fee for consulting archives and data; b) registration fee for permanent representative offices of foreign countries (regions) in China; c) extension fee for permanent representative offices of foreign countries (regions) in China; d) registration fee for preliminary application for names of foreign enterprises in China; e) registration fee for preliminary application for names of foreign-invested enterprises; f) fee for changes made by permanent representative offices of foreign countries (regions) in China. According to the old practice, exclusively foreign-owned enterprises had to pay fees for registration and change 1.5 times as much as domestic enterprises do. But now, after the adjustment made by the Municipal Price Bureau and the Municipal Bureau of Finance regarding administrative charges for industries and businesses, exclusively foreign-owned enterprises are now being given a treatment no less favorable than domestic enterprises.

 

V.               Improving and Standardizing Market Regulation

2003 has witnessed the continuous efforts made by Shanghai to improve and standardize market regulation. Such efforts are reflected in the following aspects:

 

1.                        Launching an Inspection Exemption System for Industrial and Commercial Enterprises

    As required by law, an annual inspection must be made on enterprises by relevant industrial and commercial administrative agencies so as to qualify the enterprises’ further existence in the market. However, since 2002, Shanghai Industrial and Commercial Administrative Bureau has started to grant inspection exemptions to 12,000 enterprises that have no record of offence for three consecutive years, perform well, and enjoy high creditworthiness. This means those enterprises will pass the inspection instantly when they submit their annual inspection report without being further examined. Besides, they don’t have to file their accounts with the Bureau. Apart from offering convenience to enterprises, the inspection exemption system is intended to help enterprises exercise self-discipline and establish solid credit status so that they will seek compliance with laws and regulations in their business activities. Based on this system, in 2003, Shanghai has extended the annual inspection commitment filing system so as to meet the WTO requirements on day-to-day regulation of enterprises.

   

2.                        Implementing Classified Enterprise Management and Disclosing Enterprise Information Regarding Severe Law-breaking Conduct

    WTO membership has placed new requirements on industrial and commercial administration, stimulating a fundamental change in regulatory activities. To streamline administrative efficiency, standardize administrative behavior and foster self-discipline awareness in enterprises, Shanghai’s Industrial and Commercial Administrative Bureau started to implement classified enterprise management and disclose information regarding severe law-breaking conduct in 2003.

1)      Breaking enterprises down according to record. (a) A total of about 3,000 clauses in relevant laws and regulations have been modified according to the enterprises’ law-breaking record, detailed as minor offence, ordinary offence and severe offence. (b) Enterprises have been automatically put under four headings by the computer system according to their law-abiding record, the four headings being enterprises without law-breaking record, enterprises with minor offence record, enterprises with ordinary offence record, and enterprises with severe offence record. (c) Based on the above classification, the Bureau then differentiates regulation efforts towards different enterprises. Enterprises falling into first two categories are less closely monitored than key industries and enterprises that require early warning while enterprises falling under the last two categories are closely monitored. By adopting different regulatory measures, Shanghai is able to intensify regulation over law-breaking enterprises and encourage self-discipline and creditworthiness in other enterprises.

2)      Disclosing information regarding severe law-breaking conduct. As an extension to the WTO principle of transparency, government should regulate the means of disclosing administrative information as well as behavior. Shanghai has been trying to seek compliance with WTO rules by laying down concrete rules governing the disclosure of information regarding severe law-breaking conduct and exposing cases and persons involved to the media and the public. Hopefully, the increase in the exposure of activities that greatly disrupt the market will send a warning signal to businesses so as to bring about a sound early-warning system in the market.

 

3.                        Standardizing Contracts and Reinforcing Administrative Guidance and Service

     In 2003, such administrative agencies as the Shanghai Industrial and Commercial Administrative Bureau, together with trade associations, worked out sample texts for 6 types of contract, namely, Technology Consulting Contract, Technology Development Agreement, Technology Transfer Agreement, and Technical Service Contract (four technology contracts). They also revised the sample texts for Real Estate Sales Contract, Shanghai Domestic Travel Contract, and Shanghai Overseas Travel Contract. These sample texts are one way of standardizing business operation and reinforcing administrative service, supervision, as well as guidance. To ensure transparency, these sample texts were made public on the Shanghai Industrial and Commercial Administrative Network (http://www.sgs.gov.cn).

 

4.                        Implementing Online Annual Inspection

     To facilitate annual inspection and reduce business cost, the Shanghai Industrial and Commercial Administrative Bureau has managed to launch online inspection through the application of internet technologies and the development of inspection software. The new method has greatly simplified the inspection procedure and raised work efficiency, and therefore achieved very good results.

 

VI.            Promoting E-administration to Raise Efficiency

Starting from 2003, there has been a sweeping upgrade of the Official Website of Shanghai Municipality (http://www.sh.gov.cn/). This involved the introduction of the English version as well as a personalized version of ‘My Shanghai-China’ catering to citizens, enterprises, investors, travelers, disadvantaged groups, etc. The upgraded website is able to provide customized information and services with increased transparency and speed. Online services include the application of business license, joint examination and approval, annual inspection, tax declaration, entry visa application, tariff inquiries, passport application, donation and assistance application, hiring lawyers, etc. On the whole, every effort has been made to make the website more personal, comprehensive and international

 

On the homepage of the official website, you can see such columns as “SERVICE FOR CITIZENS” “SERVICE FOR BUSINESS” “INVESTEMENT” “INSIGHT INTO GOVERNMENT INFORMATION” “PUBLIC SUPERVISION” “ADMINISTRATIVE NEWS” “ONLINE COMMENTS” and “SERVICE NAVIGATOR”. Listed in columns like “SERVICE FOR CITIZENS” “SERVICE FOR BUSINESS” are almost all items that require government examination and approval. With a simple click on the icons, you can get guidance and consultation, and download forms. Such online services as case-acceptance, application and declaration, and inquiries, are also available to you. So far, the official website has got 144 items for online acceptance, consultation and complaint, over 2,000 forms under 561 items for downloading. Moreover, the website is empowered by its link with other government agencies in the areas of industry and commerce, finance and taxation, public safety, social security, civil affairs, which are trying to interact with one another.

 

The same efforts have also been made by district and county governments as well as commissions and departments under the Municipality to promote E-administration. The result is streamlined working procedures and improved working efficiency. At the same time, working procedures have become more transparent and open as the public can keep themselves informed of the progress of the administrative work by making online inquires. Therefore, the modern E-administration in Shanghai represents a profound change in management model from the traditional ambiguous and flexible management to transparent and standardized management, thus avoiding irregular practices and administrative mishaps.

 

 

 

 

 

Box 1.1 The “Examination and Checking” System run by Shanghai in the Registration of Foreign-invested Enterprises

 

 

 

 

 

 

 

 

 

 

 

 

Box 1.2  Notification Commitment Implemented by Shanghai Commercial and Industrial Administration

 

 

 

 

 

 

 

 

 

 

Box 1.3 “Information Spokesperson” System Established by Shanghai

On June 3, 2003, the Shanghai Municipal Government announced the establishment of the “Information Spokesperson” System, by which the spokesperson will represent the government in delivering news and administrative information, explaining government policies, and responding to the inquiries made by foreign and domestic media as well as the general public on issues of their concern. The system not only safeguards people’s right to be informed but also provides a better way of public supervision over government work. The spokesperson will serve as a bridge connecting the government with the media which will in turn connect the government with the general public.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Box 1.4 Online Registration System for the Establishment of Permanent Representative Offices from Foreign Countries (regions)

Starting from April 23, 2003, enterprises from foreign countries (regions) can have their permanent representative offices established through online registration and application. Once their application is accepted, they can go to the industrial and commercial administrative authority with written documents for further examination. On passing such examination, they will be given the permit on the spot. Online registration system has greatly reduced the frequency of visits to the bureau from three times (getting forms, submitting documents, claiming permit) to one time (examining and checking), and shortened the lead-time from ten days to one day. The new registration system has done away with the time limit as foreign enterprises can submit their application anywhere at any time. The added advantages are less lead-time, fewer visits, and lower business costs. Therefore, the system has met with an instant welcome from foreign enterprises once the plan was carried out. By December 31, up to 2,746 foreign representative offices were approved through online application, representing 80% of the total applications during the same period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Box 1.5 Further Lowering the Hurdles for Foreign-invested Enterprises’ Access to Certain Industries

According to the Accession commitment, foreign enterprises shall be allowed to conduct share-holding business in commercial retailing no later than December 11, 2003. In 2003, two famous French brands, Dia (Leader Price) and Decatlon, broke new ground by establishing a chain discount supermarket and a large sports goods retail company successively in Shanghai, pushing Shanghai up to a higher-level and more diversified competition arena. At the same time, foreign enterprises are allowed to establish wholly-owned construction companies in Shanghai ahead of schedule, since according to China’s commitments, such status is granted by China within three years after China’s accession to the WTO. However, based on its practical regulatory experience, Shanghai Municipality has allowed large qualified international construction firms, such as Obayashi and Shimizu, to establish wholly-owned companies in Shanghai.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 1.1 Shanghai Media’s Presence at a Public Hearing involving the Decision on Administrative Punishment

    On October 15 2003, the Shanghai Municipal Environmental Protection Bureau imposed a rectifying order and a fine of RMB100,000 on a chemical plant in Qingpu County. Upon receipt of the punishment notice and a hearing notice, the chemical plant submitted a request to the Environmental Protection Bureau for the presence of media at the hearing. The Bureau, reporting the case to relevant authorities, notified the media listed by the plant via the Municipal Information Office. As a result, the major media agencies in Shanghai attended the hearing. The presence of media at a public hearing involving administrative punishment is a symbol of improving transparency in the Municipal government in implementing administrative laws and regulations.