Global Policy Studies & International Security

On the Anti-Monopoly Law in China

The Anti-Monopoly Law in China took effect on August 1, 2008. After more than a decade of legislation process, it finally won– in a principle sense; none of the 40 complementary measures were carried out except one. It is still an empty law. People doubt what its actual effect will be.

The legislation process of Anti-Monopoly Law has been indeed a long journey. The law, which aims to prevent dominance of any one company, was first proposed in 1994. But its pace was slow until 6 years later because of pressure from big state-owned companies and multinationals that had just started doing business in China. It wasn't until 2001, when China joined the World Trade Organization, did the process accelerate. In August 2007, the law was finally passed by the National People's Congress. Although the measure compromised with state-owned enterprises, which dominate industry, people tend to believe it will make way for free market competition against monopolies. It's gained a lot of praise and set a milestone in China's legal history.

Debate about the Anti-Monopoly Law never ceased. The previously missing implementation guidelines have recently begun to be unveiled. On August 5, the first guideline about business combinations was finally fleshed out. National private enterprises are eager to fight for competitiveness in the Chinese market, which has long been dominated by state-own and multinational companies. Consumers are looking for better quality services and cheaper prices, which to date have been limited because of monopolist market control. But without detailed rules, how can the law truly be implemented?

State-owned companies control significant domains of national economy including oil, telecommunications, railways and electricity. They are considered under the protection of the government yet their services and prices will be checked and balanced according to Anti-Monopoly Law. This is considered a failure of legislation by many companies who want to enter the markets, and by the citizens who feel unsatisfied by current consumer choices. People are concerned if state-owned companies can really be checked and balanced by their owner: the state.

However, state-owned companies have their own concerns. The government itself wants to protect these state-owned companies, in order to let them grow big enough to resist market share intrusion from the foreign companies that WTO regulations mandate must be allowed in. The state-owned companies argue that it's better to let China's own companies to grow at this point rather than allow multinationals to take over control of crucial economic areas.

Oil always plays a crucial role in any economy, including that of China where the industry is an interesting example of the problem the Anti-Monopoly Law seeks to tackle. Two big state-owned oil companies, Sinopec and China National Petroleum Company, control the oil drilling and refining in China. Although private gas stations were growing fast two years ago when the market was open, one-third of them were closed down in the face of the tension of oil crisis and high prices. The two big oil companies would not give them oil to sell. They have their own gas stations, whose supplies are ensured. Drivers are complaining about the lack of gas supply, which has resulted in long queues for gas, and the companies' control of prices, which rose rapidly recently. Of course, these two big state-owned companies don't seem to be worried about the Anti-Monopoly Law.

Since most of the detailed rules of Anti-Monopoly Law have not been decided yet, there's still room to debate and make the most out of it.

The law is a great step towards market competition. First, the Anti-Monopoly Law has the potential be effective in reducing the increasing tension between citizens and state-owned companies. People are most sensitive to the high prices in telephone, electricity and gas to name a few. But these state-owned companies have always been unchallengeable. Until, perhaps, now.

Secondly, the protection of Chinese businesses in crucial sectors doesn't have to mean simple protection. If competition is introduced in the crucial economic areas, Chinese private companies could make the market more efficient. They can grow up in a competitive environment, in order to better compete with foreign companies that may soon enter the industry.

Thirdly, competition within areas should be encouraged as well. Although this may reduce someone's inherent interest, this is the way where market should go. Through competition, the companies that can provide better services or goods at a lower price can win. Not only consumers benefit from this; it also improves the whole market. Process can be painful, but it's for the sake of healthy development.

The Anti-Monopoly Law should get more support from the government, businesses, and consumers. And the detailed rules of the law should be carefully decided and carried out for effective implementation. Most importantly, we hope that the Anti-Monopoly Law can be implemented equally among all competitors.

Shu Yang

Shu Yang is a first year Master of Global Policy Studies student at the LBJ School of Public Affairs.


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