Doing Business 2008: China Among Top Reformers, New Property Law and Bankruptcy Laws Improve Ease of Doing Business

September 26, 2007

Beijing, September 26, 2007 – China was a standout in regulatory reform in 2006/07, according to Doing Business 2008 - the fifth in an annual report series issued by the World Bank and IFC. The top reformer in East Asia and the Pacific and among the top 10 in the world, China introduced far-reaching protection of private property rights and a new bankruptcy law, which contributed to an improvement in the ease of doing business.


China's new property law put private property rights on equal footing with state property rights. The law also expanded the range of assets that can be used as collateral to include inventory, accounts receivable and future assets. Meanwhile, the new bankruptcy law gives secured creditors priority to the proceeds from their collateral. Construction also became easier, with electronic processing of building permits reducing time of approvals by two weeks.


Later this year IFC will for the first time launch its first sub-national Doing Business report for China. The study will be jointly conducted with the Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences (CASS). The methodology follows the Global Doing Business approach which has been applied in similar projects in Mexico and Brazil, and is tailored towards China's specific needs. IFC plans three rounds of the exercise in China over the next three years. 


Eastern Europe and Central Asia is the leading reformer among regions, with three countries from the former Soviet Union - Estonia, Georgia, and Latvia - all in the top 25 on the ease of doing business. Led by India, South Asia has also picked up speed in reform, outpacing East Asia and the Pacific. The top 10 reformers worldwide are China, Egypt, Croatia, Ghana, FYR Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, and Bulgaria.


Worldwide, 200 reforms - in 98 economies - were introduced between April 2006 and June 2007. In East Asia and the Pacific the most popular reform was to ease access to credit, with improvements in China, Indonesia, Micronesia, and Vietnam. The second most popular was to simplify business start-up, with action in the Lao People's Democratic Republic, Malaysia, and Timor-Leste.


"The report finds that equity returns are highest in countries that are reforming the most," said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. "Investors are looking for upside potential, and they find it in economies that are reforming - regardless of their starting point," he added. Large emerging markets are reforming fast: China, Egypt, India, Indonesia, Turkey, and Vietnam all improved in the ease of doing business. And, the report finds, as more countries simplify regulation to make it easier to do business, more entrepreneurs are going into business.


In East Asia and the Pacific, Indonesia, the runner-up reformer in the region, simplified the process for getting construction permits, cutting delays from 49 days to 21. It also expanded the coverage of loans by the public credit registry and strengthened investor protections by increasing disclosure requirements.


Other notable reforms in East Asia and the Pacific

  • Mongolia put in place new laws for corporate in­come, value-added, and personal income taxes, introducing a new flat tax for individual income. It also reduced the top marginal rate for corporate income tax from 30 to 25 percent.
  • Lao PDR implemented border cooperation agreements that will help speed trade and eased licensing requirements for new businesses.
  • Malaysiastreamlined business start-up, reduced corporate income taxes,and simplified online tax filing.
  • Thailandintroduced an electronic one-stop shop for traders, cutting the time to import and export by five days.
  • Vietnam made it easier for busi­nesses to access credit by allowing general description of assets and obligations in collateral agreements as well as the use of future assets to secure debt. It adopted a new securities law that establishes a securities ex­change and trading center, and it strengthened investor protections through a new enterprise law. The law requires that investors be involved in major company actions, increases disclosure for related-party transactions, and introduces fiduciary duties for company directors.

Worldwide, the report finds that higher rankings on the ease of doing business are associated with higher percentages of women among entrepreneurs and employees. "The benefits of increased regulatory reform are especially large for women," said Justin Yap, an author of the report. Women often face regulations that may be aimed at protecting them but that have a counterproductive effect, forcing them into the informal sector. There women have little job security and few social benefits. "These regulations can take work away from willing workers and business opportunities away from potential entrepreneurs," Yap added.


Doing Business 2008 ranks 178 economies on the ease of doing business. East Asia and the Pacific accounts for two of the top 10, with Singapore ranking first and Hong Kong (China) fourth. Other top-ranking economies in the region are Thailand (15), Malaysia (24), Fiji (36), Tonga (47), and Taiwan (China) (50).


Worldwide, the top 25 in the rankings are, in order, Singapore, New Zealand, the United States, Hong Kong (China), Denmark, the United Kingdom, Canada, Ireland, Australia, Iceland, Norway, Japan, Finland, Sweden, Thailand, Switzerland, Estonia, Georgia, Belgium, Germany, the Netherlands, Latvia, Saudi Arabia, Malaysia, and Austria.


The rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. They do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. Since 2003 Doing Business has inspired or informed more than 113 reforms around the world.

Media Contacts
In Beijing
Huan Ni
Tel : (+86) 010 5860 3262
In Hong Kong
Andrew Mak
Tel : (+852) 9277 0706
In Washington DC
Karina Manasseh
Tel : +(202) 458-0434