ANYONE who has ever had the experience of opening business in China might not find the following circumstances particularly strange.

Not long ago, the Legal Daily reported that a large shopping mall selling construction materials in Beijing wanted to open a chainstore somewhere in Northwest China. Knowing that the procedures to obtain a licence are troublesome in China, the boss decided to dedicate 600,000 yuan (US$72,289) and a whole year of his time to get through all the procedures.

After three years had passed, the boss had spent more than 5 million yuan (US$600,000) and accumulated over 100 official stamps. Yet he was still accused of skipping certain procedures.

In Jinhua of neighbouring Zhejiang Province, a farmer wanted to set up a chicken farm. He rushed about trying to do so for more than two years, collecting over 270 official stamps. When he was finally given a business licence, the best time for investing had already passed.

Such situations are widespread in China.

"It seems that everything we want to do needs government approval," said Eric Xiang, a local restaurant owner.

He cited his own experience as an example. To obtain a licence for his restaurant, he had to get stamps from the police bureau on public security, fire prevention, and the qualifications to conduct his particular business; from the health bureau for hygiene standards of food and environment; and from the environmental protection bureau showing he has obtained pollution treatment facilities.

If the restaurant's business had also involved a gym or cigar sales, it would have needed to gain approval from other government sectors, acquiring further permits.

These stories can be easily understood if you see the big picture and realize how many administrative licences the country has.

Statistics show that the State Council alone has set requirements for more than 4,000 administrative licences.

Each province, municipality or autonomous region has its own regional administrative license requirements, for between 1,000 and 2,000 different licences. Given this huge number, it is no wonder there are so many procedures involved in even a simple initiative in China.

Experts say that at least 50 per cent of these administrative licences are useless and should either be eliminated or merged.

The problem with administrative licensing is not just the "endless" need for stamps. The whole process of government licensing, which has long lacked transparency, has become a big major source of corruption.

"Inviting officials for meals or giving them gifts are just unavoidable if you want to avoid trouble and get through all the procedures smoothly," Xiang said.

When added to the licence fees, the price of starting a business in China can be very intimidating.

Take the "bun office" In Zhenzhou, capital city of Central China's Henan Province for example. Any enterprise making buns, or steamed bread there, must obtain licences from the city's bun office at a cost of 1,100 yuan (US$130) and also from the district's bun office for 1,600 yuan (US$193). This is just one tip of the vast iceberg of licence requirements in China.

Cutting back

Fortunately, the government has finally made the decision to operate on this festering sore. A law on Administrative Licencing will be put into implementation in July, and if effectively enforced, it will bring about a reversal to the current situation, with the first change being in the administrative mode of the government.

According to Zou Rong, associate professor with the East China University of Law and Politics, the existing system is based on the premise that most economic activities are only allowed after obtaining government permits. It is only in exceptional cases that individuals enjoy the assumption of economic freedom.

The new principal entirely reverses this assumption, seeing the need for government licences as the exception rather than the rule. In most cases, people should be allowed to make their own decisions.

Only six fields are reserved for government licences, mainly industries concerning state security, public safety, potential environmental damage, use of limited natural resources and public service industries with direct effects on public welfare.

Even for these six fields in which licences will still be required, the law determines that if order can be achieved through self-regulation by individuals, the market, intermediate sectors, or by enhancing government inspections, it is still better not to require licences.

"The new law could help a lot in changing the ideology of government sectors, pushing them to pay more respect to the people," Zou said.

Previously, even a village committee was able to set administrative licences. With the new law, only the State Council, the National People's Congress and provincial People's Congresses can do so. Provincial government will only have the right to set temporary administrative licences, which are valid for one year.

"This is a solid measure to restrict the number of licences and eliminate unnecessary ones," experts said.

New focus

According to the new law, the focus of government work will be shifted from issuing licences to conducting inspections.

The old system meant that starting new businesses was made especially difficult. Yet after obtaining the necessary licences, the government seldom bothered to ensure compliance through inspections. That is why so many enterprises which had installed the equipment needed for pollution treatment seldom actually used it.

"In some places, inspections were simply a way of extorting money from businesses rather than ensuring their compliance with regulations," Zou said.

If the enterprise didn't "satisfy them", inspectors would just return again and again, inspecting everything in order to interrupt the company's normal work.

To deal with the problem, the new law has strictly clarified the principle that government sectors making inspections must not interrupt normal business activities or accept valuables of any kind from those inspected.

The result of the inspection should be recorded in official documents which are archived and open to the public.

Another important measure taken to decrease corruption is the requirement for full transparency during the whole licencing process.

Administrative sectors will be required to publicize their decisions, and people have the right to access all relevant documents.

Most of the administrative licences will be free of charge, except those which need to be restricted, such as those for industries using scarce natural resources. Even in these cases, the fees will be submitted to the central government to avoid corruption.

The cost of the licencing and inspection system will be supported by government revenue. "For the government, the implementation of the new law amounts to a major surgical operation undertaken on itself," Zou said.

Perhaps because of all the difficulties this will involve, the government is paying great and detailed attention to the law.

Early this year, Premier Wen Jiabao held a meeting specially devoted to discussing the law. With ministers and heads of each province and municipality participating, the meeting sent a strong signal that the government was taking the law with almost unprecedented seriousness.

The new climate is already having an effect. In Shanghai, the Municipal Government announced at its most recent press conference that the city will scrap half of its administrative licences to fully prepare for the implementation of the law.