2. Although the Anti-Monopoly Law devotes a chapter to administrative monopoly, which is the abuse of "administrative power to exclude or restrict competition", administrative monopoly is not really included in the scope of anti-monopoly, and the separation of powers between the administration and the market is not protected in the form of legal provisions. The lack of a strict definition of price manipulation provides a legal basis for administrative intervention in market pricing. The government's intervention in pricing can certainly ensure a momentary price stability, but it may make the market's price signaling role malfunction, lengthening the time needed for economic adjustment.
3. The Anti-Monopoly Law explicitly excludes from the scope of the anti-monopoly law "the state-owned economy in a position of control of the lifeblood of the national economy and the national security of the industry". This special case is equivalent to the form of the law to determine the legitimacy of the monopoly of state-owned enterprises. So far, the de facto monopolization of China's factor sectors by SOEs has been the root cause of factor prices and structural distortions. Reforms and market opening in some of these sectors, such as energy and banking, have already achieved some success, and the new Anti-Monopoly Law could bring such reform efforts to a halt and slow down the process of marketization in the factor sectors.
4. China is in the middle of the transition to a market economy, and the degree of marketization is bound to increase. The Anti-Monopoly Law should clarify in detail the division of labor between administrative power and market forces, and gradually compress the space for state-owned monopolies in order to establish a market mechanism for fair competition. Any policy formulated in the form of a law should be forward-looking rather than setting up artificial barriers. The difficulty in enforcing the Antimonopoly Law lies in making a clear distinction between monopolistic behavior and normal competition, the details of which are crucial. Otherwise, the Anti-Monopoly Law, in the name of protecting competition, may act as anti-competitive.
5. Administrative monopoly profits drag down national economic growth. The huge profits of state-owned sectors such as fuel, electricity and communications, now measured in hundreds of billions of yuan, are not the joy of the national economy, but a worry for it.
6. Government-maintained monopolies, such as limiting the number of licenses for the benefit of privileges, or poorly run state-run businesses where the government assists the unfit to survive by prohibiting competition. Almost all economists oppose this type of monopoly, but paradoxically, the antitrust laws are lenient.
-Will the Antimonopoly Law protect or constrain administrative monopolies?
First, although the Anti-Monopoly Law devotes a chapter to administrative monopolies that abuse "administrative power to exclude or restrict competition", it is silent on the still prevalent restrictions on transactions due to administrative approvals and the lack of competition brought about by high "entry thresholds". However, no comment was made on the still prevalent trade restrictions due to administrative approval and the lack of competition due to high "entry thresholds". The definition of "abuse of administrative power" is also limited to two aspects, namely, discrimination among commodity operators and geographical discrimination. In other words, the administrative monopoly is not really included in the scope of anti-monopoly, and the separation of powers between the administration and the market is not protected in the form of legal provisions.
Secondly, the provisions on price manipulation, due to the lack of a strict definition, provide a legal basis for administrative intervention in market pricing. Under the conditions of market economy, especially when the threshold of market access is low, price alliances for the purpose of price fixing are usually difficult to sustain, and anti-price fixing may become an excuse for the government to manipulate prices. Of particular importance is the fact that the Anti-Monopoly Law does not explicitly limit the manner and scope of government intervention in the market pricing mechanism. So far this year, in the face of inflation, government intervention in market pricing has abounded. The government's intervention in pricing can certainly ensure momentary price stability, but it may cause the market's price signaling to malfunction, lengthening the time needed for economic adjustment.
-Will the Anti-Monopoly Law protect or restrict state-owned monopolies?
The Anti-Monopoly Law explicitly excludes from the scope of the anti-monopoly law "industries related to the lifeblood of the national economy and national security in which the state-owned economy is in a controlling position". This exception is equivalent to the form of law to determine the legitimacy of the monopoly of state-owned enterprises. Unlike the anti-monopoly laws of market economies, where national security is generally addressed in the context of foreign mergers and acquisitions, non-state-owned enterprises in China are treated on an equal footing with foreign-owned enterprises.
Since the law does not specify which industries are those that are related to the lifeblood of the national economy and national security, there is in fact the possibility that any industry that is currently state-owned and controlled is among those that need to be protected. According to the SASAC's interpretation, the state-owned economy should maintain absolute control over important industries and key areas related to national security and the lifeblood of the national economy, which include the seven major industries of military, grid power, petroleum and petrochemicals, telecommunications, coal, civil aviation and shipping.
According to 2005 data, 15 of the 39 manufacturing industries calculated on the basis of fixed assets accounted for more than 40 percent state-owned or state-controlled, and these industries occupy key sectors such as water, electricity, coal, gas, oil, and metallic and non-metallic mineral resources. This list could be stretched further by adding other service industries such as banking, railroads, health care and education. What's more, if SOEs expand further into already-open industries during the nearly one-year period between now and next year's implementation of the Anti-Monopoly Law, there is a possibility that SOEs in those newly-expanded industries could be asked to be brought under the protection of the Anti-Monopoly Law as well.
To date, SOEs have de facto monopolized China's factor sectors and are the root cause of factor prices and structural distortions. Reforms and market opening in some of these sectors, such as energy and banking, have been somewhat successful, and the new Antimonopoly Law could bring such reform efforts to a halt and slow down the process of marketization in the factor sectors.
While the implementation of the Anti-Monopoly Law has not weakened and may even promote administrative and state-owned monopolies, its impact on FDI is still likely to be neutral, which is in line with the policy of "two taxes in one". The Anti-Monopoly Law treats both Chinese and foreign enterprises equally, which will help fair competition outside the monopolized industries of state-owned enterprises; the impact of factor price control on more technologically advanced foreign enterprises or foreign enterprises with stronger financing ability may be less than that on domestic non-state-owned enterprises; and the policy on M&A of foreign enterprises in China may also be gradually made transparent with the introduction of the Anti-Monopoly Law. The downside, of course, is that foreign investors have a higher degree of uncertainty in antitrust litigation, and proceedings may be lengthier, among other things.
China is in the middle of the transition to a market economy, and the degree of marketization is bound to increase. The Anti-Monopoly Law should clarify in detail the division of labor between administrative power and market forces, and gradually compress the space for state-owned monopolies in order to establish a market mechanism for fair competition. Any policy formulated in the form of a law should be forward-looking rather than setting up artificial barriers. The difficulty in enforcing the Antimonopoly Law lies in making a clear distinction between monopolistic behavior and normal competition, the details of which are crucial. Otherwise, the Anti-Monopoly Law, in the name of protecting competition, may play an anti-competitive role. ■