Xinhua Insight: Chinese regulators lend support for competition
                 English.news.cn | 2014-03-07 11:12:33 | Editor: Yang Yi

BEIJING, March 7 (Xinhua) -- Chinese regulators have voiced support for breaking competition barriers during this year's parliamentary session as the government promised to open key industries wider to non-state enterprises.

"Ultimately we will have to rely on competition," said Miao Wei, minister of industry and information technology (MITT), when commenting on China's 4G charges, widely deemed too high for customers.

Speaking to reporters on the sidelines of this year's annual sessions of China's national legislature and political advisory body, Miao said the MITT had noticed public concerns over the 4G charges.

"But the government will only play a tiny role here," he said.

"I'm sure competition can do the job," he said, adding that the MIIT had issued licenses for mobile telecom resale business to 19 private companies by the end of 2013, a major step forward in the opening of the basic telecom industry to private capital.

His comments came as traditionally state-controlled industries are facing increasing pressure from technology-enabled ventures looking to ease barriers for competition in key sectors of the economy.

In the most notable case, online finance fund Yu'ebao, launched in June last year by e-commerce giant Alibaba, has attracted more than 81 million users and over 500 billion yuan (81 billion U.S. dollars) in assets by paying interest rates of up to 6 percent on mobile phone-accessible accounts.

The rate is almost twice that of traditional banks, which only pay a maximum 3.3 percent for one-year deposits. Alibaba's rivals, such as Tencent Holdings Ltd. and Sina Corp., are also launching similar services.

Such a big migration of money has eaten up much of the traditional banks' profits. The good old days when banks could reap huge gains simply by absorbing deposits with low costs and provide loans at a much higher rate seem to be over, at least for now.H Next in line came the taxi industry, another monopoly stronghold, in which drivers are required to register with taxi companies and pay monthly vehicle rental and management fees.

Cab-calling services have become an unexpected battlefield between Tencent and Alibaba, which have been locked in a fierce race to attract customers by offering generous rebates to both drivers and passengers to use their cab-booking smart phone apps and payment systems.

The apps essentially allow customers and drivers to cooperate to break through government price controls on fares to negotiate a market price for transportation.

Users are allowed to bid for cabs by adding an additional flat fare, but they do so at the expense of the monopolizing cab companies that provide dispatch services to cabbies.

Millions have applauded the emergence of these technology-enabled ventures, but many others were also unnerved.

Big banks are unhappy about online finance funds taking a bite off of their profits. Yu'ebao and its peers were quickly labeled "blood suckers" by commentators, even though the public saw the banks and their low rates as miserly.

Meanwhile, there have also been rumors flying among taxi drivers that the authorities are considering banning the use of taxi-booking apps for good.

The dust only seemed to have settled after authorities weighed in.

China will not ban Internet finance, but will improve regulations in the area, said Zhou Xiaochuan, governor of the central bank.

"China encourages technological applications in the financial sphere," he said.

Yi Gang, another vice governor of the central bank, also said the central bank supports innovative financial products like Yu'ebao, but will take "appropriate" measures to prevent possible risks arising from the sector.

In a draft government work report submitted to lawmakers for review Wednesday, Premier Li Keqiang promised to "promote the healthy development of Internet banking."

Li Dongsheng, a national lawmaker and head of TCL Corporation, one of China's leading consumer electronics makers, said the word "healthy" indicates that authorities will try to regulate and guide the development of the booming sector.

Meanwhile, Minister of Transport Yang Chuantang also said Wednesday that cab-booking apps represented "an easier and more effective service model."

"Generally speaking, we support the taxi-booking apps, although we still have to make some adjustments and improve regulations there," Yang said, citing concerns that the apps may create an unequal playing field for both drivers and passengers.

Already, the central government has pledged to speed up the development of a mixed-ownership economy by letting non-state capital into more state projects, including those in oil, railways and telecoms.

"We will formulate measures for non-state capital to participate in investment projects of central government enterprises," Premier Li said in the draft government work report.

Non-state capital will be allowed to participate in projects in areas such as banking, oil, electricity, railway, telecommunications, resources development and public utilities, according to the report.

"In future reforms, authorities not only have to seek progress in the marketization of the production factor market, but should also push for breakthroughs in the reforms of monopolized industries," said Chi Fulin, head of the Hainan-based think tank China Institute for Reform and Development.

"The marketization reform progress in the next two or three years will set the tone for China's economic growth in the following five to 10 years," he said.

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