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The draft anti-monopoly law, which was submitted to the national legislature for review at the end of last month, has been in the spotlight for more than 10 years.

And it will surely attract more attentions in following months, or even longer, before lawmakers can reach a consensus on some of its more controversial articles and pass it.

China's increasing integration with the global economy and the insufficient reform of its planned economy are factors certain to complicate the legislative process.

Legislators promised that the law, described as the nation's "economic constitution," should be "consistent with international practices" and China's national conditions. It means that the legislation will leave room for China to further reform its State-owned enterprises and administrative system to better adapt to the market.

According to Cao Kangtai, minister of the State Council's Legislative Affairs Office, the proposed draft intends to ban internationally recognized monopolistic practices characterized by "restricting and excluding market competition."

Meanwhile, the legislation also takes into account that the competitiveness of Chinese companies needs to be improved, according to Cao.

Due to deficient administrative reforms, some local governments have been able to abuse their power by restricting competition in local markets. This has enabled them to seek unreasonable profits for local companies, or even for themselves.

That is why the draft law devotes an entire chapter to tackling the problem, said Cao, although there is a great deal of controversy over whether the anti-monopoly law should be responsible for handling such an issue, which is usually not covered by overseas anti-trust laws.

The law has attracted much attention from officials, lawyers and investors both at home and abroad. European Union Competition Commissioner Neelie Kroes said recently that adopting an anti-monopoly law would help benefit China's economy by attracting more investors.

And Chinese officials and scholars reiterated that the law will not discriminate against foreign-funded companies in China.

"The draft law does not target any type of foreign-funded companies, so there is no discrimination at all," said Zhao Xiaoguang, an official from the Legislative Affairs Office of the State Council.

Professor Sheng Jieming from Peking University told the Beijing-based China Economy Weekly that the law will improve foreign firms' investment environment and poses no threat to them.

China's increasing openness has provided the drafters of the law wider access to overseas experiences.

According to Cao, the law-drafting team studied certain anti-trust cases and relevant legal systems in more than 25 countries and regions, including the United States, Canada, Germany and Japan. Some transnational companies, such as General Electric, Panasonic and BASF, have been invited to give their opinions on the draft law.

Foreign-funded companies have expanded rapidly in China in recent years. According to the United Nations Conference on Trade and Development, foreign acquisitions and mergers accounted for less than 5 per cent of foreign FDI in China in 2001, but this leapt to 63.6 per cent in 2004.

During panel discussions on the draft law, some members of the National People's Congress Standing Committee said that the law must prevent foreign-funded companies from seeking monopoly status in the Chinese market as a result of aggressive mergers and acquisitions.

The drafting and implementation of the anti-monopoly law should prevent mergers and acquisitions from threatening the country's economic security, according to Cao.

The draft law requires companies planning a merger to notify the government only if their combined global sales exceed 12 billion yuan (US$1.5 billion) and if any one company had sales in China of more than 800 million yuan (US$1 million) in the prior year. The law drafters decided on such a requirement by learning similar experience of foreign countries as well as studying China's actual conditions.

According to an NPC Standing Committee member, who wished to remain anonymous, the State-owned enterprises and transnational companies are two major entities responsible for most monopolistic practices in China.

The anti-monopoly law does not aim to prevent companies from becoming bigger and stronger, but stop them from using their favorable market status to restrict market competition, said the member.

Another NPC Standing Committee member, Xin Chunying, said earlier that there is still no timetable for the passing of the law due to its complexity.

No matter how complex the legislation, China has made an important step to better regulate market competition.

(China Daily July 21, 2006)