Countries and Regions

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p. 6 of 21 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Policy and Development Issues C. Poverty Assessment D. Assessment of Socio-Environmental Performance E. Governance: Sound Development Management F. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Subregional Economic Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - People's Republic of China : I. Country Performance Assessment

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E. Governance

34. Since 1978, as part of the transition towards a market economy, the Government has undertaken many reforms to strengthen governance. These include initiatives to improve accountability in public administration and corporate governance, enhance participation of stakeholders in the decision making process, and promote transparency and predictability in public policy formulation. Despite the significant progress achieved to date, much remains to be done.

35. The 1998 Government restructuring and downsizing, in particular spinning –off commercial operations to independent holding companies, will improve accountability by distancing organs of state from commercial activities. This builds on the separation of the military from business entities in 1998. Ongoing efforts to amend the Company Law and the Bankruptcy Law, coupled with the closing of a growing number of SOE’s, demonstrate Government’s commitment to improve corporate governance and to hold accountable SOE’s that fail to perform.

36. Participation is promoted through a wide range of organizations, including over 700 000 non-Government (fei zhengfu) and non-SOE (fei guoqi) organizations, international non-governmental organizations, social societies (shehui tuanti) and village committees. For example, Article III of the PRC Constitution officially recognizes the village committee as the basic administrative unit and mandates direct elections for village leaders, and all villages are expected to hold elections by 2000.⁵ Participation mechanisms are also used extensively when resettlement and compensation issues are involved. ADB supported projects, such as the Land Administration Law and he National Guidelines for Water Tariff, require public consultation with affected communities. Public comments by letter or E-mail are being sought on the draft Tenth Five Year Plan.

37. Since 1993, PRC has been undertaking the formidable task of developing a legal system that is responsive to the needs of a market economy, with support from the ADB. Significant progress has been made, such as enshrining the rule of law in the PRC Constitution in 1999. According to the legislative work program for 1999-2003, PRC plans to amend a number of existing economic laws, prepare a set of new laws and draft implementing regulations for several other laws. The Accountancy Law was revised in June 1999 to bring PRC accounting standards in line with international best practice. Other important laws that will be drafted or revised include the bankruptcy law, the trust law, the social security law and the regulation for winding up insolvent financial institutions.

38. The Government is gradually ratifying the conventions on labor standards adopted by the International Labor Organization (ILO), with 20 of the 100 active standards ratified so far. Of the eight core ILO conventions,⁶ PRC has ratified two: Convention 100 relating to equality of opportunity and treatment and convention 138 relating to minimum age. The Government is considering the ratification and convention 111, as well as major non-core conventions concerning safety and health in construction, minimum standards on merchant ship, labor administration and labor inspections in industry and commerce.

39. Public access to information has improved since the 1980s, although the media is still Government controlled. Internet penetration has the potential to vastly accelerate access to information. By the end of 1999, PRC had over 15,000 websites, of which 700 were news-related. Survey data indicate that 4.3 million urban households (roughly 14 million residents) have access to the internet, with penetration significantly higher in the coastal areas⁷ than the southern inland areas.⁸

40. Although economic information is still guarded more closely in PRC than in some other countries, Government recognizes that a market economy requires improved access to accurate, timely economic information. Statistical data are regularly published in Chinese, English, and other major languages. Questions remain regarding the reliability of the information since data from the administrative reporting system are relied upon in the compilation of national accounts, but this reporting system is managed entirely by the local governments and there is minimal validation control in the system. The Government is aware of these issues and has initiated some changes in its data collection process. Improved corporate information is also expected, following the requirement in 1999 that 5,000 of the biggest enterprises report data directly to the National Bureau of Statistics (NBS). The Government has requested technical assistance from ADB for the establishment and improvement of its sample survey system for industrial and commercial enterprises in 2000.

41. The Government launched a fierce attack on corruption, embezzlement, and the illegal use of public funds in 1998, which has continued in 1999 and 2000. The Anticorruption Conference of the State Council in January 1999, attended by the Premier, Vice-Premiers and Ministers, confirmed the anticorruption drive as one of the Government’s top priorities. The Government has introduced measures to abolish affiliations between Government and business, including separating the military from business entities in 1998. There is an ongoing campaign to inspect public works and to hold officials personally accountable for shoddy construction, misallocation of funds and corruption. In June 1999, the Government announced that it would tighten regulation of the central budget, strengthen its audits and set up a body to punish corrupt officials. Some senior officials who have been involved in corrupt practices have been arrested and punished.

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