World Bank hails China's progress
By Xiao Zhang (China Daily)
Updated: 2004-04-09 08:34

The World Bank yesterday hailed China's "major progress" in improving its business climate, but called for more efforts to improve creditors' rights and creditor information systems.

Michael Klein, vice-president of the global finance giant and chief economist of International Finance Corporation, applauded the nation's development over the past 20 years, adding "I'm confident that in the coming decade China will catch up as fast as it did with the rest of the world." Klein yesterday released a Chinese version of Doing Business in 2004: Understanding Regulation, a new annual report that provides comparative data on the business climate in 133 countries worldwide.

The Chinese version was accompanied by a Country Report highlighting China's performance on five key indicators - market entry, employment, contract enforcement, creditor rights and creditor information, and bankruptcy.

The report finds that China performs well on business start-up costs, at 14 per cent of per capita income, below the East Asia regional average of 56.8 per cent and close to the 10.2 per cent average among members of the Organization for Economic Co-operation and Development (OECD).

It takes an average of 46 days to start a business in China, the report says, compared to the East Asia regional average of 66 days.

But the report offers less pleasant reading when it comes to China's performance on creditors' rights and creditor information systems.

"Credit information sharing is important because it opens up credit markets by expanding access to first-time borrowers and repeat borrowers with good credit histories," said the World Bank.

Although the government is currently working hard to build a credit information system, the current lack of this has made it difficult for China's small and medium-sized enterprises to obtain necessary funding, Klein noted.

The absence of such a system did not  impede China's economic growth, but "if China wants to promote local companies and entrepreneurs, moving in that direction is a major challenge," he said.

Doing Business collects and analyzes data on 133 countries, including OECD countries. The analysis is based on assessments of each country's laws and regulations, with input from and verification by local experts who assist entrepreneurs in starting a business, hiring and firing workers, getting credit, and closing a business.

The report's data allows countries to benchmark themselves against neighbours, major competitors and any country that has developed best practices on the various indicators.

"Doing Business is a tool for policy-makers and the public to give them quantitative ways to measure business regulations to see how well they allow entrepreneurs to start, operate and grow businesses," said Klein.

Among other findings of Doing Business in 2004, the report concludes that regulation in poorer countries is more cumbersome for all aspects of business activity.

Heavier regulation is generally associated with greater inefficiency in public institutions - longer delays and higher costs - and results in higher unemployment, increased corruption, and less productivity and investment, but not in the improved quality of private or public goods, it says.

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