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Important Step Forward
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The State Council's approval in principle of a draft of the long awaited anti-monopoly law marks a significant step forward in the country's efforts to create a fair and orderly marketplace.

This legislation, on which work started more than a decade ago, has long been viewed as a much needed weapon in the battle against anti-competitive behavior.

Relevant anti-monopoly provisions can be found in many existing laws and regulations. But they have become increasingly insufficient to target monopolistic practices emerging during the nation's market-oriented economic reform and its rapid integration into the global economy.

Hence, the battle against monopolies makes it imperative for the country to enact comprehensive and systematic anti-monopoly legislation, which will help ensure the healthy development of the market economy.

After further revision, the draft anti-monopoly law will be submitted to the country's top legislature for deliberation.

But while applauding this legislative progress, we must also be aware that the current draft will not offer a legal remedy for all forms of monopoly.

By excluding most of the clauses related to administrative monopolies, it now focuses mainly on checking market-based monopolies.

Both forms of monopoly hinder the country's sound economic growth. Be it by administrative means or market dominance, monopoly will curb fair competition at the expense of consumers and the country at large.

On the one hand, consumers are disadvantaged, as, under a monopoly, the prices of goods or services will always remain at an artificially high level due to the absence of more efficient competitors.

On the other hand, to the country's disadvantage, monopolies prevent the entry of competitors and sources of innovation that can raise the overall efficiency of the national economy.

As a market economy newly developed out of many years of central planning, China still has a number of key sectors dominated by a number of large state-owned enterprises with administrative monopoly power.

The fact that average wage levels in these monopoly sectors is three times the national average shows that the public has paid an unfairly high price for goods or service these State firms provide on an exclusive basis.

Meanwhile, with their recent aggressive purchases of some Chinese companies, there is an increased threat of foreign firms having a monopoly in some sectors.

In terms of expediting this legislation, it may be wise to narrow the targets of the new draft to mostly market-based monopolies. As the Chinese economy is further opened and reformed, it is predictable that this sort of monopoly will be the main target of the country's anti-monopoly efforts.

Yet, in order to protect fair competition and to boost the efficiency of the national economy, the authorities also need to keep an equally attentive eye on administrative monopoly.

(China Daily June 9, 2006)

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