V. Prevention of Corruption through System Reform and Institutional Innovation

Since the reform and opening-up drive was launched in 1978, especially since the beginning of the 21st century, China has adhered to the principle of controlling and combating corruption by way of development and reform. In view of the major fields and key links likely to breed corruption, vigorous efforts have been made to promote institutional reform and innovation, to establish new institutions and mechanisms that accord with the demands of the times and strive to prevent and control corruption at the very source.

Deepening the reform in the system of administrative examination and approval. The Chinese government has been going all out to push forward reform in the system of administrative examination and approval, and speed up the separation of the functions of government from those of enterprises, state asset management authorities, public institutions and market-based intermediaries to accelerate the transformation of the functions of the government. On the basis of comprehensively sorting out matters requiring administrative examination and approval, the state has sharply reduced or adjusted such matters. Since the reform of the administrative examination and approval system was launched in 2001, various departments of the State Council have canceled and adjusted over 2,000 items requiring administrative examination and approval, and the local governments canceled and adjusted in total over 77,000 items which used to come under this heading. The two numbers of items added up to over half of the former total of such items. As for the rest of the items, administrative service centers have been extensively set up to openly examine and approve them, an electronic monitoring system has been established to promptly monitor such examination and approval, and an accountability system and an information feedback mechanism have been established to enhance work efficiency and reduce the possibility of rent-seeking act of power.

Promoting the reform of the cadre and personnel system. China adheres to the principles of democracy, openness, competition and merit in establishing a scientific mechanism for selecting and appointing cadres as well as a management and monitoring mechanism in this regard, aiming at increasing public trust in its selection and appointment of cadres, and preventing and combating corruption at the very source in appointing cadres. By issuing in succession the Guidelines for Deepening Reform of the Cadre and Personnel System, Regulations on the Work of Selecting and Appointing Leading Party and Government Cadres, Supervisory Measures for the Selection and Appointment of Leading Party and Government Cadres (Trial), and Accountability Measures for the Selection and Appointment of Leading Party and Government Cadres (Trial), the CPC has drawn up a comprehensive plan for reforming the cadre and personnel system, made rigorous stipulations regarding basic principles, standards, procedures and methods for the selection and appointment of cadres, and tightened supervision over the work of cadre selection and appointment. We stick to the standards of political integrity and professional competence, with the former being the most important. We comprehensively press ahead with such systems as democratic recommendation and assessment, opinion polls, preliminary investigation report, public announcement before appointment, as well as systems of exchange of posts and recusal for cadres, and vigorously promote open selection and competition for posts, and spread and improve the system of appointing cadres to important positions by local Party committees through voting.

Deepening the reform of the judicial system and working mechanism. Aiming to safeguard judicial justice, in accordance with the principles of scientifically allocating the power of investigation, supervisory power, adjudicative power and enforcement power, China is establishing a fair, efficient and authoritative socialist judicial system. A police discipline inspection system has been established and the systems of people's assessors and people's supervisors have been implemented to expand judicial democracy and promote judicial openness. Supervision over judicial activities has been intensified, and the exercise of discretionary power by judicial officers has been regulated. The accountability system has been improved for those enforcing the law wrongly and acting against law and discipline so as to ensure judicial justice.

Promoting the reform of the fiscal management system. Since 1998 the Chinese government has proposed the goal of establishing public finance, actively promoted the reform of the fiscal management system, and deepened the reforms concerning openness of departmental budgets, centralized treasury payment system, the separated management of revenue and expenditure, government procurement, and regulated transfer payment. So far, China has included revenues from administrative fees, government-controlled funds, compensated use of state-owned resources and state capital operations in the budgets or the range of separated management of revenues and expenditure, ultimately attaining the goal of having all of them turned over to the state treasury. China has initially established the basic framework of departmental budgets suited to its national conditions, and comprehensive use of budgetary and extra-budgetary funds has been primarily realized, and the goal of "one budget for one department" has been achieved. The state promotes the reform of the work-related consumption system, such as use of vehicles for official duties and official receptions, to regulate work-related consumption by Party and government leaders. These measures have regulated the government's management of money matters, increased the transparency of fiscal management and effectively hold in check corruption in the management and use of fiscal funds.

Quickening the reform of the investment system. To prevent corruption in the field of investment, the Chinese government is striving to establish a new type of investment system which features market-led investment, independent decision making by enterprises, independent review of loans by banks, diversified forms of financing, standardized intermediary services and effective macro-control. In 2004, the State Council promulgated the Decision on the Reform of Investment System, making an overall plan for deepening the reform of the investment system. Through the reform, enterprises have been gradually assured to make their own decisions in investment. The state has established and constantly improved a monitoring system for government investments, improved the systems of public announcement and accountability for major government investment projects, and tightened supervision over investment intermediary agencies. As for projects undertaken with investments from the central budget, the agent system is being tried out by over two-thirds of provincial-level governments so far.

Promoting the reform of the financial system. China separates the business operations of the Central Bank from those of commercial banks, as well as of banks from those of securities firms and insurance companies, and detaches policy-based finance from commercial finance. Efforts have been made to constantly strengthen and improve macro financial control, establish and improve the separated financial regulatory systems for banking, securities and insurance industries, tighten financial oversight to gradually regulate the order of financial markets. The systems of information disclosure and credit rating have been established and improved to promote the rapid, healthy development of the financial markets in the country. Efforts have been made to press ahead with a series of major financial reforms towards introducing the shareholding system in state-owned commercial banks, restructuring of securities firms, and equity reorganization of joint venture insurance companies by injecting more funds from Chinese enterprises to gain control, to further improve the corporate governance structure, fully sort out and manage historically accumulated financial risks, and initially establish a system to protect investors. Positive efforts are being made to promote the establishment of a payment system, extend the use of non-cash payment tools, improve the system of real-name financial accounts, and effectively prevent and severely crack down on corruption activities by means of bank accounts, securities markets and capital operations. A basic database of the credit of enterprises and individuals across the country has been established, and work has been done to speed up the construction of a unified credit information platform of the financial sector. Work has been done to establish a series of systems, such as system of customer identification, system of report and record of large-sum and suspicious transactions so as to strengthen regulation over anti-money laundering. These reform measures have not only promoted the standardized, healthy development of the financial sector, but also helped ward off financial risks and corruption.

Establishing a system of allocating resources by the market. The Chinese government prioritizes improving systems and tightening supervision and regulation to prevent corruption in allotment of public resources, trade of public assets and manufacturing of public products. With regard to construction projects, efforts have been made to speed up the establishment of an integrated and standardized tangible market, improve the legal regime to regulate bid invitation and bidding activities. In the grant of land-use rights, a system of open competition is being carried out to grant the right to use land for construction purposes, while land for commercial use is granted by way of bidding, auction, and for-sale notification. From 2001 to 2009, the area of state-owned land granted through bidding, auction and for-sale notification had increased from 7.3% to 85.3% of the total land area granted. In transaction of property rights, the government rules that the principles of compensation for equal value, openness, fairness, justice and competition must be observed. Regarding government procurement, an operation mechanism featuring mainly public bidding has been enforced, saving over 300 billion yuan of fiscal funds from 2002 to 2009. In the area of mineral resources development, the regulations for bidding, auction or for-sale notification concerning the grant of the rights to prospect and exploit mineral resources have been implemented rigorously, and any acts going against law and discipline in mineral resources development are to be investigated and punished seriously.