The latest draft version of the anti-monopoly law, which has been submitted to the State Council's Legislative Affairs Office, has dropped the article about setting up an independent anti-monopoly administration, according to sources.

"It is difficult for China to establish such a national body within the current administrative framework," said the source, who is close to the draft. He refused to elaborate on the difficulties.

It is yet to be decided which administration will watch over the implementation of the upcoming law, although it is the Ministry of Commerce that is responsible for the draft, he said.

The ministry, which has power over foreign and internal trade, seems to be the most suitable authority.

The ministry was created during the 10th National People's Congress last March by incorporating the former Ministry of Foreign Trade and Economic Cooperation, and related departments of the State Economic and Trade Commission and the State Development Planning Commission.

But the State Administration of Industry and Commerce also has some power in the area since it oversees the implementation of the Law Against Unfair Competition, which has some anti-monopoly stipulations.

The source said the administrative level of the department to be responsible for the law's implementation has not yet been decided.

The previous version of the draft stated that a powerful agency should be established directly under the State Council.

According to the old draft code, the new anti-trust administration's portfolio would mainly cover policy-making, giving and withdrawing approval on anti-monopoly affairs, probing into the competition-related activities of major enterprises and handling cases that violate the anti-trust law.

Analysts argue that the absence of such an agency will make the law less powerful and less effective.

A law professor, who declined to be named, said the key issue is whether a related department will have sufficient power and independence to deal with monopolies.

"The two elements are important to challenge the practices of some government departments that obstruct competition," he said.

Such power is also necessary when dealing with enterprises which have dominant market power and often possess strong lobbying power, said the professor, who is an expert in China's legislation on competition.

The drafting of the anti-trust law started in 1994, but there have been numerous revisions since because of controversies.

But the drafting process is expected to finish soon as the law has been listed on the legislative agenda of the 10th National People's Congress in its five-year tenure, which ends in 2007.

The draft anti-trust law contains articles regulating monopoly agreements, abuse of dominant market status, large-scale consolidation and administrative monopolies.

The draft defines "monopoly" as a single operator controlling half, or more, of an industry's overall market share, or two operators collusively holding two-thirds, or three holding three-quarters.

The draft forbids government departments coercing people to buy or sell the commodities of designated operators. It also blocks attempts to create regional trade blockades by restricting the flow of commodities.

Assistant Minister of Commerce Huang Hai said last week that local protectionism is a serious issue in China and threatens the establishment of a national market system.

Huang said many local governments have a huge stake in fostering a number of local enterprises which are their tax base and source of financial revenue, and have erected barriers to prevent outsiders from entering local markets.

"Without enough power, how can the related authority beat this behavior," the professor said.

The United States and European Union have very strong, competent authorities to watch the market order.

(China Daily June 29, 2004)