The government may introduce a long-expected antimonopoly law to challenge domestic and multinational companies' market power as early as 2006, according to the country's legislature.
The National People's Congress (NPC) will consider a draft Antimonopoly Law in 2006, along with legislation to deal with State assets, unfair competition, and corporate taxes, the NPC's Standing Committee -- or ruling body -- said, according to Xinhua.
The NPC is charged with examining and passing major laws. It may approve the proposed legislation or send it back to the government for changes.
The antimonopoly law has been in gestation for over a decade and it could affect industries such as energy and technology.
Some investors see the measure as a potential ram for opening up parts of the economy still in State hands. In September, the Organization for Economic Cooperation and Development said the law could help promote fairer competition.
"The proposed antimonopoly law should cover a much wider range of anticompetitive activities than do current laws," it said in a report on China's economy.
But multinationals and foreign business associations have voiced misgivings about the law and contend it could be used to force them to give up valuable technology and markets.
While multinationals are reluctant to publicly discuss the proposed law, in private many executives say previous drafts left too much leeway for taking away intellectual property set tests for mergers and acquisitions that were too stringent.
The American Bar Association and other groups have lobbied for changes in the draft law.
"Although the draft Antimonopoly Law does not distinguish foreign and domestic firms, its initial targets are likely to be foreign firms with prominent positions in Chinese markets," wrote Nathan Bush, a Beijing-based lawyer with O'Melveny & Myers LLP, in a recent commentary on the proposed law.
Chinese Government agencies have accused multinationals of unfairly exploiting technological assets, including patents, to dominate markets and deter Chinese competitors. Chinese press reports on the proposed law have named Microsoft and Intel as potential targets.
Early in December, South Korean regulators used antimonopoly legislation to fine Microsoft US$32 million for bundling together software.
The U.S. Government is also keeping a close eye on the Chinese legislation, an official of the U.S. Trade Representative (USTR) said in a recent interview. The United States will assess whether any legislation violates China's commitments to the World Trade Organization, said Tim Stratford, the USTR official responsible for China.