In a sweeping new regulation released Monday, the State Council banned any governmental division from undermining fair competition by restricting the access to their local markets.

Regional protectionism has long been blamed for economic inefficiencies and investment disincentives in China, experts said.

In some cases, local governments allow small, pollution-spewing firms to churn out resource-depleting or fake goods rather than allow better quality products to be traded, they said.

“Regional protectionism runs against the country’s effort to build a unified, fair and orderly market system,” said Han Xiaoming, an economics professor at the Renmin University of China in Beijing. “Its existence is detrimental to the improvement of overall performance of the national economy.”

The State Council document, signed by Premier Zhu Rongji last week, prescribed that no local government agencies can specify that their enterprises and consumers have exclusive access to the local market.

It also said that no barriers should be erected on roads, at bus or railway stations and at ports to deny the entry of products produced by companies in other regions.

Local governments also may no longer impose discriminative measures, such as different inspection and technical standards or pricing rules to thwart outside companies, it said.

Furthermore, local officials won’t be permitted to restrict or exclude enterprises of outside regions from investing or establishing branches in their regions.

The document said local governments and related departments should assume the responsibility of stopping these practices. Enterprises and investors can counteract the now-outlawed practices by reporting complaints to the province or the State Council.

The move should motivate local firms to improve their products and their business structures to become more competitive, Han said.

(People’s Daily 05/01/2001)