The creation of a state market regulatory administration (“SMRA”) emerged as one of the biggest outcomes from China’s sweeping overhaul of its governmental architecture at the National People’s Congress (NPC). The newly established super-regulator will now be the chief overseer of China’s market order, consolidating the major authorities responsible for market oversight within one big administrative house.
Abolishing and absorbing three major institutions
Under the new arrangement, the following governmental bodies will be absorbed by the SMRA and no longer exist:
- State Administration for Industry and Commerce (SAIC)
- General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ)
- China Food and Drug Administration (CFDA)
Drawing powers from existing entities
The SMRA will also siphon off the following powers from the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), and the State Council:
- Pricing supervision and anti-monopoly enforcement
Big picture for the SMRA’s portfolio
The new regulator’s broad policy and supervisory remit will cover a multitude of business areas, including:
- Commercial registration
- Antimonopoly issues
- Food and product safety
- Inspection, certification, and accreditation
- Medicines and medical device products under a new China Drug Administration (CDA)
- Intellectual Property Rights (IPR) under a reorganized State Intellectual Property Office (SIPO)
- Zhang Mao: Zhang Mao, the Minister of the SAIC, was elevated as the new leader of the SMRA. Prior to becoming the SAIC chief in 2013, Mr. Zhang served as a deputy director at the NDRC as well as a Secretary of the Ministry of Health.
- Bi Jingquan: Bi Jingquan, the Director of the CFDA, was named the Party Secretary of the SMRA. After taking up the reins of the CFDA in 2015, Bi became known as a reformer at the regulator who championed innovation in the healthcare sector as well as expanding the affordability of medicines and strengthening drug safety. During his tenure, the CFDA led a crackdown on companies manufacturing low-quality drugs.
Despite the huge organizational reshuffle, companies should be aware that the familiar faces populating the SMRA’s top management team, being drawn directly from the very administrations that the new super-regulator is absorbing, should provide for a fair degree of continuity and consistency in both leadership and agendas. As a further example on top of Zhang and Bi, one of Bi’s deputies at the CFDA, Jiao Hong, will be the chief of a new state drug administration under the SMRA.
However, executives will still need to reassess their key government relationships – at all levels – that may be impacted by the restructuring and ensure that they still have the right relationships in place with the right authorities.
In the below sections, H+K China takes a closer look at three of the biggest changes under the new SMRA framework.
China’s first specialist anti-trust authority
As the lead vehicle behind Beijing’s efforts to build a fairer and more orderly competitive market, the SMAR will hold sole responsibility for competition law enforcement in China, amalgamating the anti-monopoly duties formerly spread across the NDRC, MOFCOM, SAIC, and the State Council. This structural rationalization aims to address issues such as:
- Lack of clarity surrounding anti-trust rules resulting from varying enforcement practices between different authorities
- Large anti-monopoly-related workloads being handled by separate, overburdened departments
As the consolidated anti-trust authority takes shape, companies can expect to start seeing benefits such as less jurisdictional ambiguity and more consistent competition policy. The establishment of a bigger, more integrated pool of resources that is fully dedicated to anti-monopoly matters will likely be much better equipped to handle such issues than the more fragmented previous set-up, speeding up the decision-making process for companies. And more robust application of China’s competition law can be expected.
Similar to most major reforms in China, the development of the new anti-monopoly regime will not occur overnight. Its framework and policies will likely unfold at a gradual pace in the coming months and years.
A new drug regulator
For the healthcare and pharmaceutical sector, a new drug authority, the China Drug Administration (CDA), will be formed under the aegis of the SMAR after the CFDA is rolled into the super-regulator. Under the CDA, provincial drug administrations will be established across China, and these branches will handle regulatory duties for medicines and medical devices at the local level.
The leadership of the CDA will be as follows:
- Jiao Hong: Jiao Hong, a vice minister responsible for medical law and equipment at the old CFDA, will head up the CDA. Before joining the CFDA as safety director five years ago, Jiao worked on food and drug regulation at the provincial level. She was one of the deputies of Bi Jingquan, the Party Secretary of the SMRA, while serving at the CFDA.
- Li Li: Li Li, a physician and former vice governor of Jiangsu province, was appointed as the Party Secretary of the CDA.
SIPO 2.0 – China’s revamped IPR regime
As part of the overhaul, a reorganized State Intellectual Property Office (SIPO) will be subsumed under the mantle of the SMRA. On top of its patent responsibilities, SIPO’s duties will now be expanded to include administering trademarks as well as geographic indicators (GIs), which it will take over from the SAIC and AQSIQ, respectively. However, oversight of copyrights will continue to reside with the National Copyright Administration of China (NCAC).
The freshly empowered IPR authority will now have a much wider administrative scope and can be expected to have greater resources at its disposal under the SMRA to handle casework and carry out enforcement. The new arrangement will also reduce bureaucratic overlap by harmonizing IPR-related duties under one roof. Companies should be aware that SIPO 2.0 will likely accelerate the momentum behind China’s steadily improving environment for IPR protection, helping them to better safeguard their patents, trademarks, and GIs.
H+K’s Government and Public Affairs (GPA) Team will be publishing a series of Lianghui Cheatsheets covering the key outcomes from the “Two Sessions” and their implications for businesses – available online on our “Two Sessions” Analysis Hub or by contacting us directly at GPABeijing@hkstrategies.com.