China is unveiling new fair competition rules as part of its ongoing efforts to standardize its domestic market

China has revised its fair competition review system aimed at curbing monopolies and expanding market access, in another attempt to shore up investor confidence at a time when the country is trying to grease the wheels of domestic demand.

An updated version of China’s fair competition law, scheduled to come into force on August 1, states there should be no restrictions on market entry or exit, or on the free movement of goods and economic activities, according to an announcement by the State Council on Thursday evening.

However, exceptions can be made to the amendments in specific situations that “defend national security and development; stimulate the progress of science and technology; strengthen innovation; assistance in the field of environmental protection and energy efficiency; or provide disaster relief and are in the public interest.”

These provisions should be taken into account when proposing any future policy measures, and this change underpins Beijing’s efforts to cultivate a “single internal market” – strategy proposed in April 2022 promoting more efficient production, distribution, trade and consumption, while making China an even greater magnet for global companies and investments.

The new standards will be part of the Fair Competition Assessment System, first introduced in 2016, and local governments have also been given powers to self-assess and make amendments in line with the latest announcement.

“It is necessary to introduce provisions on the control of fair competition to implement the details of fair competition and antitrust regulations and systems,” says the official statement, attributed to an anonymous spokesman of the Ministry of Justice and the State Administration for Market Regulation.

Problems regarding discriminatory market practices towards private companies… still exist

Statement of the Council of State

China has taken a number of steps to address anti-competitive market behavior in the context of slowing economic growth and intensifying economic tensions with the West. Meanwhile, private and foreign investors have been expressing concerns about unfair competition from state-owned enterprises for years.

“The Fair Competition Assessment System has encountered some challenges during implementation. Some policies fail to address system requirements in areas such as market access, government procurement and grant allocation,” the statement said. “Issues remain regarding discriminatory market practices against private companies, local protectionism and restrictions on certain industries.”

Coming third plenumwhich traditionally defines China’s economic reform and strategy for the next five to 10 years, is expected to continue to support the building of such a business environment. Premier Li Qiang has said this many times that the “marketization, legislation and internationalization” of the business environment should take a “central position” in China’s post-pandemic economic recovery.

China’s previous efforts to strengthen its antitrust efforts included establishing the State Administration for Market Regulation in 2018 and introducing an update to the antitrust law in 2022. However, the 2022 revision was seen by critics as tightening Beijing’s control over the fast-growing sector technology in China, which came as central authorities launched an antitrust investigation and imposed fines on some of China’s largest technology companies for violations of the law.

AND just over a year agoThe Chinese authorities have committed to improving the regulations under the fair competition control system. According to a statement published on Thursday evening, the project was presented in May 2023 and adopted by the State Council last month.

However, there have been no updates on removing market access barriers for the so-called negative list, which prohibits or restricts foreign and private investment in China, even though authorities said last June that more items would be removed from the list in “sensible way“.

Meanwhile, private and foreign investors continue to raise concerns about unfair competition, calling for the removal of market barriers, including the proportion of foreign ownership allowed in sectors such as the car industry.