China may pass anti-monopoly law next week

BEIJING (Reuters) - China's anti-monopoly law is likely to be passed next week, after over a decade of wrangling, but may require national security checks for foreign firms that want to buy Chinese rivals, domestic media said on Saturday.

The new law prohibits use of administrative powers to disadvantage competitors, as well as banning monopoly agreements and abuse of a dominant market provision, the China Daily, the Communist Party's English-language mouthpiece said.

It gave no other details of its content.

The anti-monopoly law was drafted in 1994, but not submitted for first review until June 2006. It will finally come into effect on August 1, 2008 if passed by the standing committee of China's National People's Congress, China's parliament.

While reformers in the government have been keen to pass the anti-monopoly law, the protracted debate over the bill illustrates the power wielded by the many state monopolies and oligopolies in China.

The clause on national security checks -- which may worry foreign firms already concerned about a rise in economic nationalism -- was added because of the growing number of foreign mergers and acquisitions, said the China Daily said.

Those deals accounted for only 5 percent of foreign direct investment before 2004, but by 2005 the figure had risen to around 20 percent, the paper added.

The newspaper did not say which ministry or body would have responsibility for implementing the law, or for leading any anti-trust actions.

The state's tight grip over large swathes of the economy has resulted, critics say, in the misallocation of resources and led to opposition to deals seen as either surrendering too much market power to foreigners, or selling industrial assets too cheaply.

Delays in passing key laws -- patent and labor contract legislation have also been held up recently -- are damaging to China as the country increasingly needs the underpinnings of a sound legal system as its firms grow more sophisticated and integrate into the world economy, analysts say.