You can expect a blizzard of bureaucracy when you try to conduct business in China. But expect this, too: The situation is getting better, however slowly the wheels of reform may creak, said experts at the session on "Political Bureaucracy from a Business Perspective."
Though there is still a lot more red tape to slash, some headway has been made and people should be optimistic, asserted Wenhao Cheng, one of the conference panelists and an assistant professor at Tsinghua University's School of Public Policy and Management in Beijing.
World Trade Organization regulations are obviously a key reason why business people should be able to see their way beyond a wearying round of forms, signatures, and approvals. According to Anthony Saich, faculty chair of Asia Programs and the China Public Policy Program at Harvard's John F. Kennedy School of Government, several time-honored practices in Asia are now "essentially outlawed" by the WTO. These include the concentration of resources, protection of the banking sector, and certain industrial development policies. National sovereignty can be overwritten in certain circumstances by the WTO, he said, and he wondered how such decisions made above the nation-state level would alter the way economic practice is carried out.
| There is a "geological dispersion" of approval powers. |
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— Wenhao Cheng, Tsinghua University |
Right now there are still three obstacles for doing business in China, said Cheng. As everyone knows, businesses are subject to numerous government approvals. One city in Hunan Province boasts sixty agencies charged with dispensing a total of 2,048 approvals, he said to no one's apparent surprise. Second, the official rules are unclear or unknown. Rules may be developed by an influential individual or agency, leading to discretionary power and corruption.
The third obstacle is what he gingerly referred to as "the geological dispersion of approval powers." In other words, the people who hold the power to say yes are spread out among the local, provincial, and national levels.
Some of the current reforms should remove unnecessary layers of approvals. They are also supposed to clarify and publicize official rules as well as concentrate what Cheng called "power locations." The government Web sites are important media venues to publicize official rules, Cheng stressed. Agencies are responsible for listing their requirements, procedures and the expected timeframe for processing applications.
According to Andrew Kai-Tak Wong, a fellow at Harvard's John F. Kennedy School of Government who studies economic and industrial development policies, a further impetus for bureaucratic reform is his sense that the Chinese domestic economy will be crucial for sustained growth. It is clear there are limitations to an export-driven platform for China, he said.
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Less in the West
One lingering problem is the tendency of reforms to move faster in the more-developed eastern part of China than in the West. In inland cities, officials have been much slower to accept the need for speed and efficiency, said Cheng. Most of the same old approvals are still required by officials. It is important to reform the whole system, not just pieces of it, he said.
Despite the WTO's overarching powers, it is important that Chinese society and the Chinese economy make the demand to remove more red tape, said Saich. The media and the judiciary will need to play important roles as they do in open democratic systems.
In addition, institutional effects can help puncture the bloated bureaucracies of underdeveloped regions such as western China, suggested Saich. For "deliberate political reasons," he said, foreign direct investment has been highly concentrated elsewhere in China. The West currently receives only three percent of FDI, he said. Businesses in the west can try to eliminate red tape, but their efforts will not count for much until China develops better internal market integration and puts more investment into the education and health sectors.
Opening up the country to a more democratic system would not eliminate or necessarily stem corruption, however, added Cheng in response to a question from the audience. His research, he said, indicates that there is no direct relationship between a multiparty political system and corruption.