The challenges of TPP to Chinese SOEs’ supervision systems and related legal reforms in China — on the perspective of referencing international competition neutrality legislation

MA Qijia1 FAN Fuqiang2

(1.School of Law, University of International Business and Economics 100029)
(2.School of Law, University of International Business and Economics)

【Abstract】State-owned enterprises (SOEs) always enjoy a variety of competitive advantages in the market because of their special form of ownership. In order to limit the competitive advantages acquired from governments by SOEs, some countries and international organizations utilized competition neutrality rules to ensure fair competition between public and private sector enterprises. The Trans- Pacific Partnership Agreement (TPP) signed recently emphasized on competitive neutrality rules as new international trade and investment guidelines and emphasizes the government’s neutral status/role. These international regulations greatly obstructed competition of Chinese SOEs in the international market. In order to adapt to the new international competitive environment, China should take the competition neutrality rules and TPP articles of SOEs for reference. Finally, the scope of the Competitive (or commercial) SOEs will be defined. Therefore, these Competitive (or commercial) SOEs should comply with the same competition rules with private enterprises, and the Chinese government should ensure regulatory neutrality in the domestic market and promote competitiveness of SOEs in the international market.

【Keywords】 TPP agreement; State Owned Enterprises (SOEs); competitive neutrality; regulatory neutrality; transparency;

【DOI】

【Funds】 2014 Graduate Student Scientific Research and Innovation Fund of University of International Business and Economics (201443); Project 211 Construction Program Initiated by University of International Business and Economics; periodical research achievements of the Collaborative Innovation Center for China’s Multinational Enterprise of University of International Business and Economics (201501YY001A).

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    Footnote

    [1]. (1) The TPP sets a new standard for global trade characterized by comprehensive market access, a regional approach to fulfill promises, meeting new trade challenges, inclusive trade and regional integration platforms. [^Back]

    [2]. (2) Ma, J. & Xiao, M. Shanghai Securities News (上海证券报), October 9, 2015. [^Back]

    [3]. (3) http://business.sohu.com/20140410/ n398018719.shtml [^Back]

    [4]. (4) In recent years, SOEs’ competition neutrality issue has attracted increasing attention from the international community. In the new generation of international economic trade rules (TTIP, FTAs) negotiations, the U.S. and Europe have vigorously promoted competition neutrality rules. [^Back]

    [5]. (5) Rennie, M. and F. Lindsay, (2011) “Competitive Neutrality and State-Owned Enterprises in Australia: Review of Practices and their Relevance for Other Countries,” OECD Corporate Governance Working Papers, No. 4, 3. [^Back]

    [6]. Ibid. [^Back]

    [7]. (7) Competitive Neutrality, a compendium of OECD recommendations, guidelines and best practices. 13–53. [^Back]

    [8]. (8) Australia’s competition neutrality policy stipulates that SOEs’ commercial operation activities must meet “major” standards including governmental enterprises, governmental agencies, and public institutions specifically engaged in commercial operation as well as governmental agencies with an annual income of more than USD 10 million from commercial activities. [^Back]

    [9]. (9) These documents include: “Several Opinions on the CPC Central Committee and State Council on Deepening the Reform of Institutional Mechanisms to Accelerate the Implementation of Innovation-Driven Development Strategy” (Doc. of the CPC Central Committee [2015] 8); “Notice of the Approval of the State Council on the Opinions of the Development and Reform Commission on Deepening Economic System Reform Priorities” (Doc. of the State Council [2015] 26); “Several Opinions of the CPC Central Committee and the State Council on Promoting the Price Mechanism Reform” [Doc. of the CPC Central Committee [2015] 28]; “Opinions of the State Council on State-owned Enterprises’ Development of Mix-Ownership Economy” (Doc. of the State Council [2015] 54). [^Back]

    [10]. (10) Normally, competition neutrality rules apply to public owned enterprises and organizations engaged in commercial operations, which will significantly affect market competition environment. In legislations of each country, there are different types of public owned entities, which will be explained in detail below. However, in each country’s legal documents and academic dissertations, for the convenience of expression and without special explanation, the term “state-owned enterprise” is generally used. If no special explanation, the author will also use “state-owned enterprises” to summarize the application scope of competition neutrality rules in this article. [^Back]

    [11]. (11)Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.1:Definitions.state-owned enterprise, monopoly, designate, designated monopoly, government monopoly. [^Back]

    [12]. (12) Ying, P. China WTO Tribune (WTO经济导刊), (4) (2015). [^Back]

    [13]. (13) Capobianco, Antonio, and Hans Christiansen, (2011) “Competitive neutrality and State-Owned Enterprises: Challenges and policy options,” OECD Publishing, No.1, 14. [^Back]

    [14]. (14) Commonwealth Competitive Neutrality Policy Statement.7–11. [^Back]

    [15]. (15) National Treatment for Foreign-Controlled Enterprises: including adhering country exceptions to national treatment (OECD). [^Back]

    [16]. (16) In Australian legislation, undertakings are established according to policies and are a specific component of government departments or agencies but their financial structure is independent from their headquarters. Its purpose is to obtain commercial profits, which can borrow money from the Treasury but need to pay dividends. Moreover, Australia’s undertakings applicable for competition neutrality legislation are fixed, not including all public institutions with only “designated business units” are applicable for competition neutrality policies. [^Back]

    [17]. (17) Capobianco, Antonio, and Hans Christiansen, (2011) “Competitive neutrality and State-Owned Enterprises: Challenges and policy options,” OECD Publishing, No.1, 14. [^Back]

    [18]. (18) Capobianco, Antonio, and Hans Christiansen, (2011) “Competitive neutrality and State-Owned Enterprises: Challenges and policy options,” OECD Publishing, No.1, 14. [^Back]

    [19]. (19) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.1:Definitions.commercial activities. [^Back]

    [20]. (20) Capobianco, Antonio, and Hans Christiansen, (2011) “Competitive neutrality and State-Owned Enterprises: Challenges and policy options,” OECD Publishing, No.1, 8. [^Back]

    [21]. (21) Commonwealth Competitive Neutrality Policy Statement. 7–13. [^Back]

    [22]. (22) National Treatment for Foreign-Controlled Enterprises: including adhering country exceptions to national treatment (OECD). [^Back]

    [23]. (23) National Treatment for Foreign-Controlled Enterprises: including adhering country exceptions to national treatment (OECD). [^Back]

    [24]. (24) Shen, M. International Economic Cooperation(国际经济与合作), (7) (2015). [^Back]

    [25]. (25) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.1: Definitions.commercial considerations. [^Back]

    [26]. (26) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.6: Non-commercial Assistance. [^Back]

    [27]. (27) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.1: Definitions, non-commercial assistance. [^Back]

    [28]. (28) Unirule Institute of Economics, (2011) “The Nature, Performance, and Reform of the State-owned Enterprises,” Unirule Institute of Economics working paper, April 12. [^Back]

    [29]. (29) Moody’s, (2012) “Government support aids cendit quality of china SOEs, IPR Strategic Business Information Database,” April 19, Thursday. [^Back]

    [30]. (30) Ma, S. & Guo, K. China Policy Review (中国经济报告), 2012–11–06. [^Back]

    [31]. (31) http: // news.sina.com.cn/c/2012-12-03/070325715489.shtml [^Back]

    [32]. (32) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.5: Courts and Administrative Bodies. [^Back]

    [33]. (33) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.10: Transparency. [^Back]

    [34]. (34) Text of the Trans-Pacific Partnership Agreement, chapter17, State-Owned Enterprises and Designated Monopolies. Article 17.10: Transparency. [^Back]

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 05, Pages 59-70

May 2016

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Article Outline

Abstract

  • Introduction
  • 1 TPP SOEs provisions’ strengthening the competition neutrality rules and China’s position
  • 2 Applicable subjects of competition neutrality rules and China’s legal adjustment
  • 3 Competition neutrality business rules and China’s legal adjustment
  • 4 Governmental regulatory neutrality and China’s legal adjustment
  • 5 Conclusion
  • Footnote

    References