International Law

The Ease (Or Unease) Of Doing Business In China. A Stagnant China.

By Dan

Though the World Bank's Doing Business Report for 2011 has already been out for a few months, I just saw a really good analysis of it today. The analysis is in the Fiducia Management Consultants' "Market Focus" Newsletter and it can be found here. Though I have never worked with Fiducia directly, I have heard good things from a client about their China market research.   

Their analysis starts out by noting how well Singapore and Hong Kong continue to do in these yearly reports:

First and second place continue to be occupied by Singapore and Hong Kong respectively, both are renowned for their efficient administrations and favourable business conditions. Although Singapore did not enact any reforms it managed to keep the top spot, which reflects its high standards for business regulation. Hong Kong performed worse than last year in areas of starting/closing a business and registering property, nonetheless it kept its overall place due to abolishing the fuel tax on diesel and implementing reforms in its civil justice system that will increase the efficiency and cost-effectiveness of commercial dispute resolution.

They then comment on how China has fallen down one spot from number 78 in the world to number 79 and then break down the various category rankings for China;

Although China is ranked 79th overall, it performs very differently in the subcategories. On the one hand it is comparatively easy to enforce contracts (placed 15th) and to register property (placed 38th), however starting up a business (placed 151st), paying taxes (placed 114th) and dealing with construction permits (placed 181st) are likely to give managers and entrepreneurs sleepless nights.

I cannot resist noting how China scores so highly in terms of enforcing contracts. The reason for this is simple. China's courts generally do enforce contracts and they usually do this faster than just about anywhere else in the world.

Fiducia then comments on something I had noticed, which though surprising to many, was not surprising to those of us who are involved with both China and Vietnam. While China has been standing still in terms of its friendliness to business, Vietnam has been steadily and fairly quickly improving. Vietnam has improved so much that it is now ranked higher than China:

A noteworthy development this year is China's neighbour Vietnam (now 78th, 10 places up), which is now positioned ahead of China with improvements in five out of the nine indicators. Some of its reforms include: making company formation easier by combining the processes for obtaining a business license and tax license, eliminating the need for a seal for company licensing, reducing the cost to register newly completed buildings by 50%, and improving its credit information system by allowing borrowers to examine their own credit report and correct errors.

Lastly, Fiducia notes how China outperforms "its BRIC companions" as Brazil is at 127, Russia is at 123, and India is at 134.

I can hardly wait to see the 2012 report. What do you think? 

Full post as published by China Law Blog on January 30, 2011 (boomark / email).