Xu Hongcai, deputy director of the economic policy commission under the China Association of Policy Science, said the pandemic had “aggravated market fragmentation” and increased “operation and transaction costs”.

The new guidelines vowed to clean up preferential policies that disadvantage foreign companies and introduce fair competition review of newly issued policies.

It also said efforts would be made to protect property rights, market access, fair competition and social credit access.

China will work to develop a “unified domestic market” for production and resource use, covering land, labour, capital, technology, data, energy and the environment, the guidelines said.

Regulatory rules would also be made more coherent and authorities would crack down on unfair competition.

“The world today is not peaceful: on the one hand, the pandemic is still raging, and the Russia-Ukraine conflict is still going on; on the other hand, competition between China and the United States is becoming increasingly more fierce, and the issue of competition with China has almost become the only bipartisan consensus in the US,” Yang Shengsong, an analyst with Huafu Securities, said on Monday.

“Under such circumstances, China’s development strategy has gone from relying on external demand in the past … to gradually based on domestic demand.”

The European Union Chamber of Commerce in China said a lot of the points listed in the plan are actually items that have been on China’s to-do list for quite some time, but it expected the guidelines would help to eliminate provincial protectionism and promote fair competition.

“It is notable that this plan – aimed at improving China’s business environment – has been released at a time when European companies that are being heavily impacted by the current Covid-19 controls implemented across China are crying out for both short- and long-term solutions to the challenges they are facing,” said chamber president Jörg Wuttke.

“This plan could be positive if it is implemented in such a way that all companies – regardless of origin – are given equal opportunities to contribute to China’s economy.”

A government adviser, who declined to be named, said the guidelines were part of the government’s push for market-oriented reform, but they questioned if such big steps should be taken so quickly.

“It is hard to put in place as now the focus is on pandemic control,” the adviser said. “But there is an urgent need to take effective measures to clear the choking points in the economy and prevent the further slowdown in growth.”

Building a “unified domestic market” is important leverage for the “internal circulation” component of Beijing’s “dual-circulation” strategy, and is likely to improve China’s potential economic growth rate, said Li Chao, chief economist from Zheshang Securities.

“But it is unlikely to get done in a day, there may be more specific policies to promote implementation in the future. The impact on the economy and capital markets is limited in the near term,” he wrote in a note on Monday.

The Chinese leadership has put more emphasis on powering growth amid external uncertainties through the country’s 1.4 billion-strong consumer market.

Xi first called for stronger efforts to reach a “unified domestic market” in September 2020. It was highlighted again in the 14th five-year plan published last year and the annual government work report issued this March.

“In today’s world, the market is the scarcest resource,” officials from the National Development and Reform Commission (NDRC), the country’s top economic planning agency, said in an interview with the state-run Xinhua News Agency on Monday.

The NDRC said the country was facing multiple problems like local protectionism, disunity of market regulatory rules, standards and procedures, insufficient market support for technological innovation and industrial upgrading.

“Speeding up building a national unified market is a realistic need of achieving scientific and technological self-reliance, ” said the NDRC.

In an editorial on Monday, the Communist Party-controlled Economic Daily said some local authorities have imposed regional blockades in the name of “internal circulation” and restricted the flow of goods on the pretext of pandemic control, which has hindered the construction of a unified national market

Business owners said that authorities need to further explain the plan and allow extensive public discussion on implementation.

Zheng Yue, a senior executive at a Shenzhen-based video surveillance products and solutions company, said the guidelines mapped out a mega project but fell short of answering a key question on how local governments are going to implement it.

“Businesses are confused after carefully reading the guideline,” she said.

Additional reporting by He Huifeng