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Regulation of Inter-Provincial Establishment in China: Learning from Europe?
Published online by Cambridge University Press: 07 November 2017
Abstract
With a multilevel governance structure, China and the EU both face the task of preventing lower level political entities from impeding capital mobility. In China, licensing barriers, as the main protectionist measure, are sometimes created by local authorities, leading to restrictions on inter-provincial establishment of companies. Moreover, whether or not to create such barriers depends on various factors. In the EU, a major effort has been undertaken to facilitate cross-border establishment and any remaining barriers mainly arise from national regulatory autonomy in some areas. In terms of further facilitating company mobility, while the strong judicial mechanism in the EU has tackled some of the remaining barriers, China's weak administrative and judicial systems seem unable to prevent the creation of licensing barriers. This paper argues that precise rules defined by the legislative authority offer a better prospect of regulatory effectiveness for China whose administrative capacities are weak and courts are not independent. More specifically, legislative decision making in the setting of inter-provincial establishment should be taken at the central level. Moreover, national legislators should precisely and clearly prescribe which authorities are empowered to control inter-provincial establishment, and under what conditions.
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