The Standing Committee of the 10th National People's Congress, the national legislature, adopted the Law on Administrative Licensing last week.

The law has established in which cases the government can give or deny formal legal permission to conduct business or business-related activities.

It defines which kinds of government bodies have the power to give the permission, the procedures for applying for permission, conducting examinations and making decisions, and the punishments for violations.

The law is a reminder of something of which few people seem very conscious: that governance is a science, not a rule of thumb.

A government has rules for others but also needs laws for itself to follow. It is not in itself a wilful force that can act on its own.

However, the notion of government was not always regarded in such a balanced way.

Back in the age of the planned economy, the omnipotent government had predominant influence on nearly all aspects of society. Business activities were under the government's strict control.

Abuse of power and the trading of power for personal gain became heinous by-products of that unipolar social structure, a problem caused by a lack of effective definition of and checks on government power.

But the scourge became even more protruding as economic activities greatly increased along with the market-oriented reforms the country launched in 1978.

A person may have to pay multiple visits to different government bodies to get a permit to run a small business, which unnecessarily takes up a lot of time and energy.

Fortunately, economic reforms have not only paid off in economic terms but have also stirred the government's consciousness of the need for self-regulation.

As the country gathers speed with its market-oriented economic reforms, government functions have been streamlined step by step to cater to the ever-progressing economic reshuffling. This calls for transparency and rules-based predictability from the government.

That is a recognized process of interaction between the economy and government in modern times.

China's entry into the World Trade Organization in December 2001 committed the country to transparency and fair competition in policy-making and the market environment. It also acted as a catalyst for the passing of the administrative licensing law, which balances government behaviour with the economy.

A more reasonable relationship between the two obviously serves the interests of society as a whole.

It is a goal the country has been after.

In 2001, for example, the State Council launched large-scale reforms to standardize government functions.

As a result, State Council commissions and ministries have given up the right to administer more than 1,000 franchise rights and have handed 82 items over to industrial associations and other intermediary agencies.

The national legislature examined the possibility of adopting a law in this respect for a long time.

In 1996, the Legislative Affairs Commission under the National People's Congress' Standing Committee started to study the issue and eventually drew up a draft. The time span itself testifies to the country's commitment to reform.

Now those unremitting efforts have culminated in the adoption of the new administrative licensing law.

It narrows the scope of businesses that require permission from the previous de facto boundless latitude.

A government licence should only be required if the businesses concerned are related to national or economic security, the public interest, the personal rights and property of other citizens, the exploitation of rare natural resources and the distribution of limited public resources, according to the law.

To avoid the misuse of power by government bodies, franchises for distributing limited resources should be granted through bidding, auctions or competitions.

Given that China is still in a transitional period to a fully market-driven economy, undesirable vestiges of old practices such as the abuse of power remain a major problem. This reality both proves the timeliness of the new law and the predictable challenges facing it in its implementation.

One weakness of the law is that it has only laid out some general principles concerning which businesses require permission from the government. It is hard for the law to go into minute detail. The relevant bodies must make their own judgements according to their understanding of the principles behind the law.

Legal experts have warned that the law's ambiguities run the risk of the law being invalidated in practice if the government departments concerned fail to appreciate its true spirit.

The inconsistency between the law and social development, which may distort the law's implementation, is another challenge.

Although the administrative licensing law embodies an advanced legal spirit, time will be needed to circumscribe the traditional intrusive role of the government. This may block the advanced legal spirit from being fully brought out.

The implementation of the law will inevitably conflict with vested interests. In practice, some of the licensing powers of government bodies may have been repealed but they may be continued in other, disguised forms.

Scientific cost-return analyses must be conducted before decisions are made on administrative licensing.

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