Research

Abstract

A survey of 120 cities in China shows that city-level investment climate varies widely. Business law and regulation are basically the same throughout China. Hence, differences mainly reflect local government efforts (or lack of efforts) to operate e... Show More

A survey of 120 cities in China shows that city-level investment climate varies widely. Business law and regulation are basically the same throughout China. Hence, differences mainly reflect local government efforts (or lack of efforts) to operate efficiently. For instance, Taxes and fees average 3.1 percent of sales revenue at the top 10 percentile of cities, versus 6.9 percent at the bottom 10 percentile. Firm interactions with major bureaucracies average 36 days/year at the top 10 percentile of cities and 87 days/year at the bottom 10 percentile. Firm expenditures on entertainment and travel, which can be a vehicle for corruption, average 0.7 percent of revenues at the top 10 percentile of cities and 1.9 percent of revenues at the bottom 10 percentile. Combined time for customs clearance of exports and imports averages 5.4 days at the top 10 percentile and 20.4 days at the bottom 10 percentile. The survey also finds significant (or noteworthy) differences in the importance of state-owned enterprises (SOEs) in local industry; labor over-staffing; firm access to bank loans; confidence in protection of property and contract rights; and adequacy of local power and transport. The prevalence of different types of industry or ownership in a particular locale seems to have some effect on tax/fee burdens, bureaucratic behavior, overstaffing, and other measures of government effectiveness. Show Less