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The Standing Committee of the National People's Congress is currently discussing the draft anti-monopoly law. In the view of this author, this is a landmark event in the country's economic life, although some people think otherwise.

Some simply dismiss the draft law as beyond the ken of ordinary Chinese people, who are preoccupied with issues such as employment and incomes. Others regard it as merely a "luxury," arguing that, as China's market economy remains in its infancy, it will backfire if handled improperly. Others believe the law will deal a telling blow to large state-owned enterprises that dominate their respective sectors, and, therefore, pave the way for large-scale privatization.

These voices represent different interest groups and reflect how divided public opinion is on such economic issues.

The draft law, regarded by many as an "economic constitution," is important because its influence would not only greatly assist the building of a market economic infrastructure, it would also help chart the future direction of China's economic reforms. And it is pretty safe to say that the draft anti-monopoly law is a vitally important measure to assure the Chinese economy's sustainable development.

The law directly concerns the people's livelihoods. It is not, as some would argue, an abstract concept.

To begin with, the law would help create an economic climate favoring fair competition, one which would offer small and medium-sized enterprises space in which to survive and expand. Once these enterprises, of which there are millions, feel secure and start to invest massively in technological upgrading and expansion, they will be able to hire large numbers of workers. This, in turn, would help largely ease employment pressures, a chronic problem for decision makers.

From a different perspective, the monopoly on resources, technology and information is currently translating into a price monopoly. Such a monopoly is nothing but the most direct encroachment upon public interests.

Examples abound telecommunication firms imposing two-way charges on mobile phone users in defiance of customers' complaints; banks levying consultation fees on clients requesting information; real estate developers turning a deaf ear to protests over soaring property prices, and coal, oil and electricity firms taking no heed of the state's macro-economic regulation.

All this threatens to deteriorate the living standards of people in the middle and low-income brackets, while also widening the already serious wealth gap.

In the absence of certain price controls in the general context that competition is protected, people's livelihoods are hardly guaranteed. In contrast, monopolies are able to continuously improve the incomes and welfare of their staff, enjoying very low competition costs.

Media reports reveal that the annual income of middle-level managerial personnel in a petroleum company, for example, stands between 250,000-350,000 yuan (US$31,250-US$43,750), enormously high by the Chinese standard. The annual salary of the governor of a state-owned commercial bank was 1.3 million yuan (US$162,500) last year and could hit 2 million (US$250,000) this year, in sharp contrast to the barely more than 1,000 yuan (US$125) monthly income of the average laborer in Chinese cities.

This kind of high pay, however, does no good to these monopolies in the long run. Reaping fat profits without being competitive only serves to wear down the vitality and creativity of these monopolies players, setting up hidden traps for their future development.

For those who worry that the anti-monopoly law would pave the way for privatization, the following facts may serve as a sobering agent.

About 140 billion yuan (US$17.5 billion) worth of costs was saved in the nation's power-generating sector last year. But at the same time, an additional burden of 160 billion yuan (US$20 billion) was imposed on electricity consumers as a result of power price hikes.

Large state-owned petrol firms keep raising their prices, using international oil price hikes as an excuse. But they never include the low costs of oil extraction on Chinese oilfields into their cost calculation.

Should all these indecent deeds be justified simply because these enterprises are "state-owned?"

When state monopolies turn the power of public wealth distribution into their own exclusive right to do what they like with this money, they cannot be said to be "state-owned" at all. Instead, they are actually "privately owned" by these specific groups of people. Some media comments say that the public no longer stand this type of behavior by these monopolies. This could not be closer to the truth.

Such monopolies are actually examples of non-market economic behavior buttressed by government power. We may as well call them "administrative monopolies."

Monopolies arising from government involvement in the economic life are a necessary economic phenomenon in the course of the nation's shift from a planned to a market economy. This kind of monopoly played a positive role in promoting the reform of the old economic set-up, which started in the late 1970s.

But these "administrative monopolies" have now started to hamper the progress of the market economy and the standardization of market behavior, as so many profound changes have already taken place in the economy. In view of all of this, the anti-monopoly law will help untangle government power and market rights, and is also an effort at clearly defining the boundaries of government power.

The process in which the anti-monopoly law is conceived, drafted, revised, enacted and implemented is also an opportunity for central and local governments to re-examine their relationships with economic activities, understand more profoundly the relationship between public power and public demand and also effectively bring an end to the government overstepping its limits in social and economic affairs.

The author is a researcher with the China Foundation for International and Strategic Studies.

(China Daily July 13, 2006)