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Fewer licenses to lower institutional costs of enterprises, says expert

Updated: Aug 14,2017 3:25 PM

In the free trade zone in Yingkou, Liaoning province, the reform of integrating 39 licenses into one was launched. It was the first test of this kind across China.

So far, 236 enterprises in Yingkou FTZ obtained the new business licenses.

In recent years, business license integration has become a major part of the Chinese government’s efforts to cut enterprises’ institutional costs, said Pan Helin, an expert in applied economics at the Chinese Academy of Fiscal Sciences, the Ministry of Finance.

High institutional costs mean unreasonable restrictions and too much red tape for enterprises to get things done.

Therefore, the priority of the administrative reform should be to delegate more power to lower levels, and reduce unnecessary licenses, Pan said.

Some economists believe sound economic performance cannot be achieved when it is too expensive to run an enterprise. A strict pre-set approval system cannot lead to high quality, and can be a source of corruption.

In addition, unnecessary reviews and approvals also consume time and energy of government staff, leading to insufficient regulation and services.

Too many administrative reviews can also depress social creativity. As more is done to cut licenses and unnecessary approvals, easier business registrations will stimulate enthusiasm of market entities, Pan said.

Data from the National Bureau of Statistics show that in April, the number of newly registered enterprises across China hit 556,000, a year-on-year increase of 9.2 percent, which means that an average of 18,500 enterprises were registered every day.

In recent years, license integration invigorated China’s innovation and entrepreneurship, providing strong support to employment and the economy.

Pan said the current license integration in Yingkou FTZ is basically aimed at simplifying procedures for enterprises, adding that continued efforts can be made to increase the reform within and across government departments.