Chinese Premier Li calls for local govts to cut red tape, stay out of running businesses

BEIJING (Reuters) - Chinese Premier Li Keqiang urged local governments to cut red tape and stay out of running businesses, in comments published on Friday, a day ahead of a gathering of the country's top politicians to discuss the reform agenda for the next decade.

Intervention in business by local governments can easily lead to monopolising behaviour, and the authorities should only be regulators, Mr Li said at a meeting on Nov 1.

"Henceforth a principle of local government will be to never again directly invest in or set up businesses," Mr Li said in the remarks published on the government's website www.gov.cn.

China's local governments have long been involved in businesses, in part because of a perception among officials that speedy economic growth in their localities hastens promotions.

A mismatch of income and expenditure obligations also drives local officials to seek other opportunities to make money, such as through land sales and borrowing via financing vehicles.

Officials should not be the drivers of the local economy but should concern themselves with "managing the traffic lights and acting as good policemen", Mr Li added.

China's leadership is expected to discuss ways to further simplify administration and decentralise government at the third party plenum meeting that begins on Saturday.

"Reforming local government is of great importance for continued economic development and transformation," Mr Li said.

"If China is to see its economic growth to date continue in the long term, and to see continued healthy development, there must be transformation."

Proposals by the State Council Development Research Center, a think tank under China's state council, or Cabinet, have urged reform of the administrative structure as one of eight potential topics for the meeting to discuss.