Good morning, it’s an honor and a privilege to be here for this important conference organized by the Ministry of Finance, the city of Beijing, and the World Bank Group.
My special thanks go to Mayor Chen; my good friend Zou Jiayi from the Ministry of Finance, and also Vice Mayor Wang Hong who visited us at our World Bank Group some months ago.
We are here today to celebrate a dramatic change in the ranking of China in the Doing Business Index.
I’d like to look forward and tackle three issues that are important to think about in this time of celebration:
- The first is the need to promote new drivers of economic growth for China;
- The second is to think about what it means China’s success in reforming the business environment; and other things that need to be improved
- And the reforms that are still needed to sustain growth in the medium and long-term.
First – Promoting New Drivers of China’s Growth.
This week, we’re celebrating the 40th anniversary of the beginning of the reforms that have driven China’s economic miracle over the last four decades. During the last 40 years, China’s GDP per capita has increased by 25-fold; hundreds of millions of new jobs have been created; and more than 800 million people have lifted themselves out of poverty. This has been an accomplishment that has never been seen before in the history of human kind.
China’s economic miracle has become a source of inspiration for many countries, for millions around the world – and for the World Bank Group – as we work toward our twin goals to end extreme poverty by 2030; and to boost shared prosperity among the poorest 40 percent around the world.
But past success does not guarantee future success. China’s economy is now gradually transitioning to a “New Normal” of slower but more balanced, sustainable growth. The old drivers of growth are declining: a growing labor force, the expansion of manufacturing, migration from rural areas to cities, and the accumulation of capital due to high savings and expanding exports.
China will need new drivers of growth to support further development in line with the ambition of the Chinese people and the country’s two “Centenary Goals”:
- To become a moderately prosperous society in all respects by 2021, the centennial of the founding of the Communist Party of China;
- And to become a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful by 2049 – the centennial of the founding of the People’s Republic of China.
The Chinese authorities are well-aware of these challenges, as reflected in the 13th Five-year Plan 2016-2020 and President Xi Jinping’s remarks during the last year’s 19th Party Congress.
The Second issue I would like to consider is China’s success implementing Doing Business reforms.
The remarkable momentum of Doing Business reforms is a testament to the continued commitment of Chinese authorities – at the central level, in Beijing and Shanghai; and across the country – to reforming the economy and sustaining robust growth. In the last 15 years, China has implemented 34 business regulatory reforms measured by Doing Business.
And during the last year, China carried out a record number of reforms to improve the operating environment for small and medium enterprises, which are disproportionately affected by cumbersome and costly regulations. China implemented far-reaching reforms in 7 out of 10 Doing Business areas, from starting a business, through construction permits and getting electricity, to paying taxes and registering property. Only Azerbaijan, in the entire world, had more reforms.
These reforms have earned China a spot among the 10 fastest Doing Business reformers around the world. China has now joined the world’s Top 50 economies on the ease of Doing Business – with an overall ranking of 46 out of 190 economies, 32 positions better than the previous year. China also recorded the third largest jump in the Doing Business score globally.
Here are examples: China has cut the time to start a business to only 9 days, which is on par with most OECD high income economies. A year ago, it took 24 days.
Together with Ljubljana, Slovenia, Beijing is now one of only two cities in the entire world where the process of starting a business is completely free. This is important – a growing body of research suggests that excessive regulation of starting a business increases the number of informal businesses and informal employment.
Another example is dealing with construction permits. A few years ago, it took more than a year to get a construction permit in Beijing. Last year, it still took 208 days. Both Shanghai and Beijing have streamlined the process and reduced the time by almost half—in Beijing, it now takes only 137 days to complete the permit process, faster than the OECD average-- while also introducing stricter qualification requirements for construction professionals.
In getting an electricity connection, Beijing and Shanghai have become the world’s role models by introducing a “three zero” policy – zero visits, zero approvals, zero costs – which will boost private sector development.
China has also continued to be one of the world’s leaders in the ease of enforcing contracts. Chinese courts have put good practices in place that promote quality and efficiency in the judicial system. When two Chinese businesses go to court to resolve a commercial dispute, they can expect their case to be resolved at a low cost and in a timely fashion.
Doing Business taught us that even with comprehensive evidence, reforms do not necessarily follow. A ranking helps put the information in front of leaders and makes it hard to ignore. In this way, the report inspired the Human Capital Index (HCI), which we launched at the 2018 Annual Meetings in Indonesia.
Like Doing Business, the HCI is based on the idea that, regardless of how complex an area may be, with solid research and methodology it can be measured. These types of data promote reform, not only because they are easy to analyze, trace and act on, but also because they increase transparency and accountability.
The Human Capital Index and the ease of doing business score have a strong, positive corelation. Both indices are important tools that can lead to increased productivity and inclusive economic growth, both if which will be crucial for China in the future. And interestigly, China is number 46 on the Doing Buisness Index and numebr 46 on the Human Capital Index.
The third issue I would like to address is China’s Medium-term reform agenda. China’s success is no small accomplishment, but other economies around the world are also reforming. Last year, we saw a peak in reform activity worldwide—128 economies undertook a record 314 reforms. This should lend urgency for China to keep working on sustaining existing reforms and implementing new ones.
In many cases, reform areas need to be sustained for several years to bring tangible results. One example is the construction process. Despite substantial reforms during the past year, China is still ranked in only 121st worldwide. These reforms take time, because it’s a complex process that requires finding a right balance between efficiency and public safety.
Once these reforms are implemented, however, the payoffs could be substantial. A recent PwC study found that for every 10 jobs directly related to a construction project, another 8 jobs are created locally, which not only bring additional income for the community, but also investments and tax revenues.
China has room for further improvement in starting a business, getting credit, resolving insolvency, and trading across borders, all of which, as we heard, China has clear plans on improving.
Other regions cannot be neglected. For reforms to be successful, it’s important to understand regional differences in the implementation of business regulations. Reforms implemented in the two main business cities can help inspire similar advancements elsewhere, but that is not necessary a given. Policymakers need to deliver on regional policies and reform implementation to ensure that no region is left behind.
Throughout the world there is a huge wealth of information and experience that could be relevant to China. There is no “one size fits all” for regulatory reform, but countries that have undertaken successful Doing Business reforms share certain features: strong high-level leadership, a long-term vision, proactive action planning, systematic results tracking, communicating achievements, and extensive engagement with the private sector.
China possesses all of these critical features. I’m convinced that further reforms to the business environment will continue, and that they will support a resurgence in productivity and growth. But further reforms aren’t possible without and unwavering commitment to continue this momentum.
China has achieved remarkable economic success over the past 40 years, supported by a continuous reform effort year after year. I want to congratulate everyone on these achievements:
- I want to first thank President Xi. I have spoken to President Xi many times about the doing business indicators. He is personally committed.
- I also want to specially thank premier Li Keqiang, who has taken personal interest and responsibility, and whose leadership has also been critical.
- Also Mayor Chen and Vice Mayor Wang, who led these reforms in their home city; and
- Vice Minister Zou Jiayi and all our friends in the Ministry of Finance.
At the World Bank Group, we’re committed to continuing to support China in its efforts to improve the business environment through knowledge sharing, policy advice, and technical assistance – drawing on the best reform examples from around the world.
We’re also committed to showcasing China’s successful reforms to other countries and helping them learn from China’s remarkable experience. I look forward to working with you to continue China’s success in the years and decades to come.