Intermediary organizations herein refer to the institutions or organizations linking the government and enterprises, producers and distributors, or individuals and organizations that Provide market entities of any kinds with services of information consultation, training, brokerage, Law, etc., for the purpose of coordination, evaluation, assessment, inspection, arbitration and other activities. In China, most intermediary organizations are privately owned while a few of them have governmental background or sponsorship. In either case, they must be legally certified as being professionally qualified and must act in compliance with the rules and principles of market economy; they have to take corresponding legal liability and economic liability thereof, and accept the governance and supervision from governmental authorities.

In recent years, China's intermediary line has grown rapidly, eventually becoming an important composition of the market-oriented operation mechanism. Tremendous intermediary institutions of various specialties emerged as the times require and the system was being perfected day by day. This is not only an inevitable result and the objective need of the fast development of market economy, but also the foundation for the operation of market-oriented entities and an effective way to reduce trading costs. As well, it is an important embodiment of the deepening of the market economy. Some people may believe that there are some problems of these Chinese intermediary organizations as most of their functions were either gradually transferred from or authorized by the government due to the great influence of the government during their formation period. As a matter of fact, most of these intermediary organizations are not subordinated to the government. Even for the few organizations with relations of administrative subordination with the government, they are running under the market rules and within the legal framework.

Ⅱ. Functions of Chinese Intermediary Organizations

(I ) Classification of Current Chinese Intermediary Organizations

There are many criteria for dividing intermediary organizations. By the patterns of action and the characteristics of providing service products, intermediary organizations can be divided into the following types:

1. Self-Disciplined Industrial Organizations

Include trade associations, trade guilds, chambers of commerce and other self-disciplined organizations that are initiated by enterprises from the grassroots for the purpose of regulating the competition between the enterprise members and maintaining the overall interests of the industry by formulating industrial development rules. Their major functions are: to protect the normal and legal rights and interests of industrial and commercial enterprises, to provide enterprise members with economic information and services for market prediction, technical guidance, investment guidance, legal consultation, training, etc. ; to smoothen the channels for international contact, and to coordinate the foreign economic exchanges and trading activities ; to pass on the ideas and proposals to the government on behalf of the members ; to coordinate the relations between vendors, mediate market behaviors in business, trade and law, restrict the market behaviors of all the members from the group level, and fight against unfair competition.

2. Legal and Financial Services Organizations

Mainly consist of certified public accountants' firms, law firms, asset and credit evaluation organizations, notary organizations and arbitration organizations. These intermediary organizations provide specific field of services in accordance with the laws of the state, regulations of the competent administrative authorities and the technical requirements to maintain the effective operation and stability of society of the market economy. Their functions are : to evaluate and assess the behaviors of the enterprises, supervise and urge them to compete under the principle of fairness and impartiality, to regulate market behaviors, fight against fraudulence and to mediate disputes in the market.

3. Information and Consulting Services Organizations

Include information centers, research and consulting organizations, evaluation organizations for investment projects, quoting systems and other organizations that provide comprehensive information and consulting services to the enterprises. These intermediary organizations feature value added information and services. In some degree, they are a factor for the economic development that can improve the economic benefits mid efficiency in allocating resources.

4. Intermediary Organizations for Market Trading

Include brokerage organizations, pawn firms, auction firms, employment agencies, and talent exchange centers. They are invited to directly provide facilities and services for trading activities in the market, and decrease the transaction cost.

5. Market Supervision and Authentication Organizations

The organizations for supervising market activities, including metrological verification agencies, commodity inspection agencies, quality inspection agencies, and qualification verification agencies. They function on behalf of the government to provide some public products, such as fighting against cheating of the consumers, maintaining impartial trading mid fair competition in the market and stabilizing the economy.

(Ⅱ) Functions of Current Intermediary Organizations in China

From a macro view, the functions of Chinese intermediary organizations can he concluded as serving, communicating and supervising. These years, with the economic development, intermediary organizations have played more and more important roles. And these three aspects of functions become more obvious, evidenced by:

Increasingly expanded service coverage and gradually enhanced level. As the labor distribution goes deeper, the functions and services coverage of intermediary organizations are expanded also. Their services have covered law, accounting, information, consulting, settlement, training, brokerage, etc., instead of the single service at the first beginning.

Second, the functions as bridge and links between all market entities are given full play. The communication fields grow wider and the channels are diversified. On account of the gradual improvement of these intermediary organizations, the communications between enterprises, government and enterprises, individuals and organizations, domestic enterprises and foreign enterprises become more convenient and smooth.

Third, the function of supervision is progressively strengthened. As in the past years the functions of intermediary organizations have been eventually recognized, their role as "economic policemen" become more notable. Particularly, in supervising enterprises' behaviors, mediating disputes and stabilizing market order, they are playing an irreplaceable role. Of all intermediary organizations, those with strong supervision power include consumers" associations, commodity inspection centers, quality inspection institutes, and metrological verification agencies. Their functions were gradually transferred from former governmental authorities with the development of the market economy and the conversion of governmental functions. In this point, these intermediary organizations are more tightly related to the government.

Impartiality is what an intermediary organization must bear. All these years, both the Chinese government and intermediary organizations have enacted a series of rules to highlight the impartiality of intermediary organizations. Particularly, intermediary organizations have made great achievements in self-discipline and self-adjustment, and sticking to the principle of objectiveness, impartiality, fairness and openness.

(Ⅲ) Relations Between Intermediary Organizations and Government

In China, intermediary organizations play various roles, but, above all, as bridge and link. To play these roles, they will inevitably have contact with government. Such relationship can be expressed as "regularization by law, self-discipline by trades and supervision from the government". What is regularization by law? - The government and intermediary organizations shall conduct their behaviors and run business within the framework of law, and either party shall not require the other party to do anything in violation of law. Self-discipline by trades means normal business activities within the trades shall be determined and solved within the trades, in disregard of the intervention of the government. Supervision from the government means the government shall supervise whether or not intermediary organizations have violated any law.

One of the key functions of the government is to formulate and preserve favorable market rules and order so as to create a loose social environment and practicing atmosphere for intermediary organizations; while the major functions of intermediary organizations are to provide public services to the society by virtue of their professional knowledge, to serve the specific groups interested on their behalf, to serve as bridge and link between the government and the enterprises, and to seek self-development from these services. These functions are realized independently under the condition of autonomy of the mass organizations, without influenced by the government. The government shall not issue administrative orders directly to these intermediary organizations. Being two different subjects of right, the government and intermediary organizations have definite and essential distinctions in power and functions.

Generally, under the economic conditions of China, the government and intermediary organizations are independent but related. That means the government and intermediary organizations have definite boundary of power and coverage of functions, without transplacement, excess of authority or vacancy between diem, but on the other hand, the government constructs a legal framework and institutes relevant rules to facilitate the effective operation of intermediary organizations while intermediary organizations smoothen up the relations between the government, enterprises and the society and lay foundation for the government to transform its functions.

(China.org.cn November 7, 2003)