Xinhua Insight: China cuts government-trade association links

China's trade associations, which traditionally have a close relationship with the government, will be given more independence but under stricter scrutiny.

The State Council, or China's cabinet, on Wednesday released a plan that said all operational, financial and personnel affiliation between the government and trade associations will be severed.

From 2018, the government will stop directly sponsoring trade associations and instead contract their services as outside agents.

Some associations that are linked to government departments or public institutions will have to separate their staff, work and property.

When the plan is fully implemented, all trade associations will be considered non-profitable NGOs and, therefore, subject to the related rules.

A pilot project will be kicked off this month at 100 trade associations and will expand, covering more organizations, in 2016 and 2017.

While cutting ties, the government has pledged to tighten external supervision.

The Ministry of Civil Affairs, which will supervise the pilot, said in a statement Wednesday that senior association officials will be put under strict supervision.

The recruitment of senior officials and their behavior on the job will also be closely watched. All will be subject to auditing upon retirement, and will be held accountable for any wrongdoings during their tenure.

The ministry will record and rate the creditability of associations, with the aim of drawing up a blacklist of those sullied by wrongful practice.

Trade associations will also be asked to improve transparency. The public and media outlets will be encouraged to report any malpractice, the ministry said.

The plan is the latest move by the government to distribute its power and duties, as a way to empower industries to self regulate.

Established organizations will act as a bridge between the market and the government, offering consultation on policies and serving industrial development interests, said Sun Fengyi, a research fellow with the Institute of Economic System and Management under the National Development and Reform Commission.

The organizations will take up the reins of responsibility left by the government, as it steps back from direct interference in the market, Sun said.

However, trade organizations in China have notable shortcomings. Due to their close links with the administration, some are run by retired government officials, who act more like semi-government regulators than organizers and leaders of industry. Many have been accused of failing to recruit suitable members or effectively influence major companies.

Also, some declining industry associations are overstaffed while some booming industries do not even have an association of their own.

"Only if trade associations walk out of the shadow of the government will they fulfill their duty and improve the market competition environment," said Zhang Zhanbin from the Chinese Academy of Governance.

Trade associations are aware of the urgency and need for change, said a source with the China Iron and Steel Association, who preferred to remain anonymous.

"The reform will force us to improve ourselves. We will have to sharpen our understanding of our own industries and expand the network so that we will play our part better," he said.

In the reform plan, the government promised to push forward legislation in this area. A law on trade associations is being drafted.

Liu Junhai, with the School of Law at the People's University of China, told Xinhua that, compared with drafting the law, it is more urgent to ensure the effective internal management of trade organizations.

"In the worst case scenario, some organizations simply copy the rules of other organizations with no intention of following them," Liu said.

Provided the number of trade associations and their complicated history with the government, this latest push is a tough task that will require courage and patience, said Sun. Endi