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The contrast between different industrial sectors in China is dramatic. While sectors such as the TV industry are involved in big price wars to undercut competitors, some sectors like telecommunications and civil aviation are enjoying huge profits thanks to their being monopolies.
It is time for the government to take effective measures to smash monopolies and build a fairer market, urged an article in the China Economic Times.
The monopolies in some sectors have drawn increasing concerns in recent years and been listed on the government's reform agenda.
Wang Qishan, minister of the office for restructuring economic system under the State Council, urged recently that if any sectors or conglomerates operate in a manner which is against competition, they must restructure.
The government must also phase out its own monopolies in some competitive sectors, Wang said.
Generally speaking, there are economic monopolies and administrative monopolies in the market.
The former are a result of fair competition in which the winner gains a lion's share of the market, while the latter are a result of the government's intervention in business operations.
Administrative monopolies play a major role in China's monopolistic sectors, said the article. The government's monopolies in the tobacco and grain sectors are typical examples.
Already there are calls for an anti-trust law to prevent monopolies pushing out competitors and impairing consumers' interests.
The law would help to curb monopolies and encourage competition. But can it bear any fruit when faced with powerful governmental departments which control most monopolized sectors? That was a question the article asked.
It just remains to be seen whether law enforcers can restrict the administrative powers in these sectors.
It will be a long and tough job, the article pointed out.
It is worth mentioning that monopolies in some domestic sectors, such as telecommunications and railways, are neither economic nor administrative. They have to be controlled by state-run enterprises because few individual entrepreneurs could afford the colossal investment needed to enter these sectors.
These sectors should also undergo restructuring to reduce monopolies and give market access to potential competitors. This will stimulate enterprises in these sectors to improve their services and benefit consumers, said the article.
There is concern that harsh anti-monopoly measures will sap the profitability of many sectors and erode competitiveness.
Some are even calling for more protection for monopolistic industries on the grounds that they need to grow bigger to compete with powerful foreign rivals.
However, monopolies will throttle the creativity of enterprises in these sectors and increase the burden of consumers, despite the huge profits brought to monopolizers.
Having monopolies can even hamper the progress of the whole economy, warned the article.
Introducing an effective competitive mechanism is the key to removing monopolies in some sectors.
As a first step, the government can deregulate price control in some competitive sectors, the article suggested.
Although the government has made great efforts in recent years to free up the market, competition in many sectors is still immature.
A major reason is that prices in these sectors are decided or controlled by governmental departments. It means numerous enterprises are deprived of a most effective tool for competition.
But a complete freeing-up of prices is by no means easy. The vicious competition in the domestic household electric appliance industry, where enterprises sell products at below-cost prices to undercut each other, has set an alarming example.
While giving enterprises more leverage on prices, the government should strengthen its supervision of the market to oversee and deal with drastic price changes, said the article.
Currently, several major monopolies, including telecommunications, power and aviation, are planning large-scale restructuring to remove the monopolies.
However, restructuring will not be a panacea for complete change. It is still difficult for competitors to enter these sectors because monopolizers naturally try to push them out and defend their own positions, the article noted.
In fact, state-run monopolies have invested an astronomical amount of money in building the infrastructure in their sectors. Their rejection of competitors is not just for fat profits but because they need stable prices to recover costs.
For example, China Telecom, the largest telephone operator in China, has reported a deficit in its local phone service.
Opening up the service will rub salt on the wound because competitors will drive prices down further.
It is unfair to the monopolizer, who has often contributed greatly to infrastructure construction in its industry.
It is recommended that the government keep prices within monopolized sectors at a reasonable standard. The government should therefore maintain a balance between the interests of monopolizers and the market sentiment for free competition, the article said.
(chinadaily.com.cn 06/28/2001)
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