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Doing Business 2015 China 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 32 Getting electricity ....................................................................................................................... 51 Registering property .................................................................................................................. 58 Getting credit .............................................................................................................................. 65 Protecting minority investors ................................................................................................... 72 Paying taxes ................................................................................................................................ 81 Trading across borders .............................................................................................................. 87 Enforcing contracts .................................................................................................................... 92 Resolving insolvency ................................................................................................................ 100 Labor market regulation ......................................................................................................... 103 Distance to frontier and ease of doing business ranking .................................................... 110 Resources on the Doing Business website ............................................................................ 113 Doing Business 2015 China 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for China. To allow useful comparison, it also information on ordering Doing Business 2015, are provides data for other selected economies (comparator available on the Doing Business website at economies) for each indicator. The data in this report are http://www.doingbusiness.org. current as of June Doing Business 2015 China 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 China 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: East Asia & Pacific based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Upper middle income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 1,357,380,000 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 6,560 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 90 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 93* distance to the best performance in each Doing Business Change in rank: 3 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 62.6 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 61.3 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: 1.3 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2015 China THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2015 China THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How China and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 China 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - China (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - China (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 China 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has China come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 China 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for China Best performer globally United States DB2015 Russian Federation Shanghai DB2015 Beijing DB2015 Indicator Japan DB2015 China DB2015 China DB2014 India DB2015 DB2015 DB2015 Starting a Business 128 151 -- -- 158 83 34 46 New Zealand (1) (rank) Starting a Business (DTF 77.43 68.72 77.76 77.01 68.42 86.21 92.17 91.22 New Zealand (99.96) Score) Procedures (number) 11.0 13.0 11.0 11.0 11.9 8.0 4.4 6.0 New Zealand (1.0)* Time (days) 31.4 34.4 30.0 33.0 28.4 10.7 11.2 5.6 New Zealand (0.5) Cost (% of income per 0.9 1.9 1.0 0.9 12.2 7.5 1.2 1.2 Slovenia (0.0) capita) Paid-in min. capital (% 0.0 78.2 0.0 0.0 111.2 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 179 177 -- -- 184 83 156 41 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 43.75 43.20 40.90 47.24 30.89 73.30 56.70 78.87 China (95.53) (DTF Score) Doing Business 2015 China 12 Best performer globally United States DB2015 Russian Federation Shanghai DB2015 Beijing DB2015 Indicator Japan DB2015 China DB2015 China DB2014 India DB2015 DB2015 DB2015 Hong Kong SAR, Procedures (number) 22.0 22.0 22.0 22.0 25.4 12.0 19.8 15.8 China (5.0) Time (days) 244.3 244.3 274.0 208.0 185.9 197.0 238.4 78.6 Singapore (26.0) Cost (% of warehouse 7.6 7.9 7.6 7.6 28.2 0.6 1.9 1.0 Qatar (0.0)* value) Getting Electricity 124 121 -- -- 137 28 143 61 Korea, Rep. (1) (rank) Getting Electricity (DTF 66.35 66.19 68.59 63.62 63.06 86.51 60.89 79.52 Korea, Rep. (99.83) Score) Procedures (number) 5.5 5.5 5.0 6.0 7.0 3.4 5.6 4.8 12 Economies (3.0)* Time (days) 143.2 143.2 145.0 141.0 105.7 97.7 179.1 89.6 Korea, Rep. (18.0)* Cost (% of income per 459.4 499.5 459.2 459.7 487.7 0.0 321.0 25.5 Japan (0.0) capita) Registering Property 37 38 -- -- 121 73 12 29 Georgia (1) (rank) Registering Property 80.67 80.66 79.30 82.33 60.40 71.33 91.27 82.92 Georgia (99.88) (DTF Score) Procedures (number) 4.0 4.0 4.0 4.0 7.0 6.0 3.0 4.4 4 Economies (1.0)* Time (days) 19.4 19.4 28.0 9.0 47.0 13.0 19.0 15.2 3 Economies (1.0)* Cost (% of property 3.6 3.6 3.6 3.6 7.0 5.8 0.1 2.4 4 Economies (0.0)* value) Getting Credit (rank) 71 67 -- -- 36 71 61 2 New Zealand (1) Getting Credit (DTF 50.00 50.00 50.00 50.00 65.00 50.00 55.00 95.00 New Zealand (100) Score) Strength of legal rights 4 4 4 4 6 4 4 11 3 Economies (12)* index (0-12) Doing Business 2015 China 13 Best performer globally United States DB2015 Russian Federation Shanghai DB2015 Beijing DB2015 Indicator Japan DB2015 China DB2015 China DB2014 India DB2015 DB2015 DB2015 Depth of credit 6 6 6 6 7 6 7 8 23 Economies (8)* information index (0-8) Credit registry coverage 33.2 30.2 33.2 33.2 0.0 0.0 0.0 0.0 Portugal (100.0) (% of adults) Credit bureau coverage 0.0 0.0 0.0 0.0 22.4 100.0 64.6 100.0 23 Economies (100.0)* (% of adults) Protecting Minority 132 123 -- -- 7 35 100 25 New Zealand (1) Investors (rank) Protecting Minority 45.00 45.00 45.00 45.00 72.50 62.50 50.83 65.83 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 5.0 5.0 5.0 5.0 6.7 7.0 5.0 8.3 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 4.0 4.0 4.0 4.0 7.8 5.5 5.2 4.8 France (7.8)* 10) Strength of minority investor protection 4.5 4.5 4.5 4.5 7.3 6.3 5.1 6.6 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 120 127 -- -- 156 122 49 47 (1)* Paying Taxes (DTF United Arab Emirates 67.44 64.37 67.45 67.42 55.53 67.19 80.63 80.84 Score) (99.44)* Payments (number per Hong Kong SAR, 7.0 7.0 7.0 7.0 33.0 14.0 7.0 10.6 year) China (3.0)* Time (hours per year) 261.0 318.0 261.0 261.0 243.0 330.0 168.0 175.0 Luxembourg (55.0) Trading Across Borders 98 98 -- -- 126 20 155 16 Singapore (1) (rank) Trading Across Borders 71.68 71.58 72.97 70.11 65.47 87.23 53.58 88.25 Singapore (96.47) Doing Business 2015 China 14 Best performer globally United States DB2015 Russian Federation Shanghai DB2015 Beijing DB2015 Indicator Japan DB2015 China DB2015 China DB2014 India DB2015 DB2015 DB2015 (DTF Score) Documents to export 8 8 8 8 7 3 9 3 Ireland (2)* (number) Time to export (days) 21.0 21.0 21.0 21.0 17.1 11.0 21.1 6.0 5 Economies (6.0)* Cost to export (US$ per 823.0 823.0 620.0 1,071.0 1,332.0 829.3 2,400.5 1,224.0 Timor-Leste (410.0) container) Cost to export (deflated 823.0 838.1 620.0 1,071.0 1,332.0 829.3 2,400.5 1,224.0 US$ per container) Documents to import 5 5 5 5 10 5 10 5 Ireland (2)* (number) Time to import (days) 24.0 24.0 24.0 24.0 21.1 11.0 19.4 5.4 Singapore (4.0) Cost to import (US$ per 800.0 800.0 615.0 1,026.0 1,462.0 1,021.3 2,594.5 1,289.0 Singapore (440.0) container) Cost to import (deflated 800.0 814.6 615.0 1,026.0 1,462.0 1,021.3 2,594.5 1,289.0 US$ per container) Enforcing Contracts 35 36 -- -- 186 26 14 41 Singapore (1) (rank) Enforcing Contracts 68.21 68.21 69.89 66.15 25.81 69.95 75.85 67.26 Singapore (89.54) (DTF Score) Time (days) 452.8 452.8 406.0 510.0 1,420.0 360.0 267.0 420.0 Singapore (150.0) Cost (% of claim) 16.2 16.2 15.1 17.5 39.6 32.2 14.9 30.5 Iceland (9.0) Procedures (number) 37.0 37.0 37.0 37.0 46.0 32.0 35.0 33.6 Singapore (21.0)* Resolving Insolvency 53 52 -- -- 137 2 65 4 Finland (1) (rank) Resolving Insolvency 55.31 55.31 55.31 55.31 32.60 93.74 49.69 90.12 Finland (93.85) (DTF Score) Doing Business 2015 China 15 Best performer globally United States DB2015 Russian Federation Shanghai DB2015 Beijing DB2015 Indicator Japan DB2015 China DB2015 China DB2014 India DB2015 DB2015 DB2015 Time (years) 1.7 1.7 1.7 1.7 4.3 0.6 2.0 1.5 Ireland (0.4) Cost (% of estate) 22.0 22.0 22.0 22.0 9.0 3.5 9.0 8.2 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 0 0 0 0 0 1 0 1 going concern) Recovery rate (cents on 36.0 36.0 36.0 36.0 25.7 92.9 43.0 80.4 Japan (92.9) the dollar) Strength of insolvency 11.5 11.5 11.5 11.5 6.0 14.0 8.5 15.0 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of s uch factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2015 China 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 China 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in China? According business city of an economy, except for 11 economies for to data collected by Doing Business, starting a business which the data are a population-weighted average of the there requires 11.0 procedures, takes 31.4 days, costs 2 largest business cities. See the chapter on distance to 0.9% of income per capita and requires paid-in minimum frontier and ease of doing business ranking at the end of capital of 0.0% of income per capita (figure 2.1). Most this profile for more details. indicator sets refer to a case scenario in the largest Figure 2.1 What it takes to start a business in China - Shanghai Paid-in minimum capital (% of income per capita): 0.0 Doing Business 2015 China 18 What it takes to start a business in China - Beijing Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 China 19 STARTING A BUSINESS Globally, China stands at 128 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in China to The rankings for comparator economies and the regional start a business. Figure 2.2 How China and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 China 20 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in China (table 2.1)? Table 2.1 How has China made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform China made starting a business less costly by exempting micro DB2013 and small companies from paying several administrative fees from January 2012 to December 2014. China made starting a business easier by eliminating both the minimum capital requirement and the requirement to obtain a DB2015 capital verification report from an auditing firm. This reform applies to both Beijing and Shanghai. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 China 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY China is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Limited Liability Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid in minimum capital requirement: CNY 0 the study of laws, regulations and publicly available City: Shanghai, Beijing information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in China - Shanghai Time to No. Procedure Cost to complete complete Obtain a notice of pre-approval of the company name The applicant picks up the application for company name pre-approval from the local Administration of Industry and Commerce (AIC), or otherwise, downloads the form from AIC’s Web site. The applicant can be the representative designated by all the shareholders or the agent entrusted by all the shareholders. The completed application form shall be signed by all shareholders of the company. The application form together with the business licenses or other registration certificates (if the shareholders are companies or other eligible entities) and the photocopy of the identity card of the individual shareholders shall be filed with the AIC. Effective July 1, 2004, enterprise name registration must follow the amended State Administration of Industry and 1 day no charge 1 Commerce (SAIC) rules (that is, the new Enterprise Name Registration Administration Implementing Measures, or qi ye ming cheng deng ji guan li shi shi ban fa). According to the new registration rules, if the applicant goes directly to the AIC, a proposed company name is approved or rejected on the spot. This is newly regulated by Article 24 of the aforementioned measures and is implemented in practice. However if the application is made through mail, fax, email, etc, the proposed company name will be approved or rejected within 15 days. Agency: Administration of Industry and Commerce Doing Business 2015 China 22 Time to No. Procedure Cost to complete complete Apply for registration certification "business license of enterprise legal person" with SAIC, the organization code certificate issued by the Quality and Technology Supervision Bureau and registration for both state and local tax with the tax bureau Since July 2010, it has been possible to use the ""parallel application and review"" process in most districts of Shanghai. The entrepreneur can submit the documents for business license, certificate for quality and technology and state and local tax at the same time at one window. All the application forms can be downloaded from SAIC’s website. The agent at the window will scan all the documents and send them electronically to all relevant agencies. The business license is approved first and the two other agencies can give their approval immediately after. They are notified online once the business license has been approved. 1/ BUSINESS LICENSE: To obtain registration certification, the company must file a completed application form along with the following documents: • Notice of approval of company name • Lease or other proof of company office. • Capital verification certificate or appraisal report • Articles of association, executed by each shareholder • Representation authorization no charge (Fee • Identity cards of shareholders and identification documents of officers exempted for micro • Appointment documents and identification documents (certifying and small size 2 name and address) of the directors, supervisors, and officers. 11 days companies from • Appointment documents and identification documents of the 2012 to 2014 - company’s legal representative otherwise 0.08% of • If the initial contribution is in nonmonetary assets, the document registered capital) certifying transfers of the property title of such assets • Other documents as required by the authorities The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. This includes the business registration fee (0.08% of the registered capital). 2/ ORGANIZATION CODE CERTIFICATE WITH THE QUALITY AND TECHNOLOGY SUPERVISION BUREAU: The company must apply for the organization code certificate within 30 days of obtaining the business license, by filing a completed application form with the Shanghai Organization Code Management Center (a branch of the Quality and Technology Supervision Bureau) along with the following documents: • Business license (original and one copy) • Identity card of the legal representative (one copy) The production cost of CNY 18 for Organization Code Certificate is exempted for a micro or a small size company. The remaining amount CNY 102 still needs to be paid to Quality and Technology Supervision Bureau for the technical service and production cost of IC card. Doing Business 2015 China 23 Time to No. Procedure Cost to complete complete 3/ REGISTRATION WITH LOCAL AND STATE TAXES: The company must file the tax registration form and the initial tax reporting forms. Together with those forms, the company submits for review the following documents: • Business license duplicate (original and one copy) • Organization code certificate (original and one copy) • Identification card of the legal representative (original and one copy) • Identification card of the taxation personnel (original and one copy) • Company seal and financial seal • Office lease agreement and receipt(s) for rent paid • Articles of association (original and one copy) and bank-issued account-opening certificate (original and one copy) • Capital verification report • Photocopy of property ownership certificate • Land use right certificate • Commitment letter regarding the authenticity of the documents submitted Agency: SAIC (Single window) Obtain the approval to make a company seal from the police department If all the shareholders are individual investors, the registration file will include the duplicate of the business license (the original and one copy) and the legal representative’s identification card. If registration is 1 day no charge 3 approved, a notice to make the company seal will be issued to the company. Agency: Police Department Make a company seal To make the company seal, the company shall designate a company possessing a Shanghai Special Industry Permit (company seal carving) (《上海市特种行业许可证》公章刻制业). This process costs CNY 70– 1 day CNY 300 4 300, depending on the design and the quality. Agency: Seal maker Pay the fee for the organization code certificate issued by the CNY 102 Quality and Technology Supervision Bureau at the time of pick-up (Production cost of CNY 18 for Prior to pick up the organization code certificate issued by the Quality 1 day Organization Code 5 and Technology Supervision Bureau and pay the fees, the entrepreneur had to obtain the company seal. Certificate is exempted for micro Agency: Quality and Technology Supervision Bureau and small size companies from Doing Business 2015 China 24 Time to No. Procedure Cost to complete complete 2012 to 2014) Register with the local statistics bureau Within 30 days of obtaining the business license, the company must apply for statistics registration by submitting to the local statistics bureau a completed statistics registration form along with the following documents: 1 day no charge 6 • Business license (one copy) • Organization code certificate (one copy) Agency: Statistics bureau * Open a bank account of the company The procedures and required documents for opening a company bank 1 day, account and transferring the registered capital to it may vary depending simultaneous with 7 on each bank’s practice. no charge previous procedure Agency: Bank Apply for the authorization to print or purchase financial invoices/receipts After registering for state or local taxes and obtaining the tax registration certificate, the company must apply separately to the relevant authorities (that is, the state and local taxation offices) for approval to purchase and issue financial invoices/receipts. The taxation authority will issue the invoice purchasing book, if it agrees to grant the no charge (Fee company such qualification, upon reviewing the following submitted exempted for micro 8 documents: 10 days and small size • Tax registration certificate (one copy) companies from • Identity card of taxation personnel (one copy) 2012 to 2014) • Application forms • Models of invoice seal Agency: Tax Authority Purchase uniform invoices no charge (Fee exempted for micro The company must obtain and submit an application form to purchase and small size 9 uniform invoices (购用统一发票申请单). The form and the authorization 1 day companies from book (from Procedure 10) must be submitted to the Tax Office. 2012 to 2014 - otherwise CNY The VAT and ordinary invoices are published by the tax authority for 1.05-1.67 per book Doing Business 2015 China 25 Time to No. Procedure Cost to complete complete anti-forgery reasons (with few exceptions). Taxpayers buy VAT and of invoices) ordinary invoices from the tax authority. The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. Agency: Tax Authority File for recruitment registration with local career service center Within 30 days of recruiting employees, a new company must register with the local career service center, sponsored by the local government. Relevant application forms which can be electronically downloaded or obtained from the local career service center shall be filled and 1 day no charge 10 submitted. Companies can register online if they have already obtained the code from the local career service center. Agency: Career Service Center * Register with Social Welfare Insurance Center Within 30 days of establishment, the company must register for the payment of employee social insurance with the local social insurance office by submitting a completed social insurance registration form and the following documents: • Company seal • Duplicate of business license (original and one copy) • Organization code certificate (original and one copy) 1 day, simultaneous with 11 After all these documents have been verified, the authorities will issue a no charge previous notice to open a social insurance account for the company. The procedure company must then apply to open a special account at the designated bank. The local social insurance office will issue the social insurance registration card to the company on receiving bank notification of account opening. Agency: Social Welfare Insurance Center * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Summary of time, cost and procedures for starting a business in China - Beijing Time to No. Procedure Cost to complete complete Doing Business 2015 China 26 Time to No. Procedure Cost to complete complete Obtain a notice of pre-approval of the company name Business founders can obtain the application for company name pre- approval from the local Administration of Industry and Commerce (AIC) office or the AIC website. The completed application form should be signed by all shareholders of the company. The application form together with the business licenses or other registration certificates (if the shareholders are companies or other eligible entities) and the photocopy of the identity card of the individual shareholders should be filed with the AIC. Effective July 1, 2004, enterprise name registration must follow the 1 amended State Administration of Industry and Commerce (SAIC) rules 1 day no charge (that is, the new Enterprise Name Registration Administration Implementing Measures or qi ye ming cheng deng ji guan li shi shi ban fa). According to the new registration rules, if the applicant(s) goes directly to the AIC, a proposed company name is approved or rejected on the spot. This is newly regulated by Article 24 of the aforementioned measures and is implemented in practice. However if the application is sent by mail, fax, email, etc., the proposed company name will be approved or rejected within 15 days. Agency: Administration of Industry and Commerce Apply for registration certification "business license of enterprise legal person" with SAIC, the organization code certificate issued by the Quality and Technology Supervision Bureau and registration for both state and local tax with the tax bureau The entrepreneur can submit the documents for business license, certificate for quality and technology and state and local tax at the same time at one window. All the application forms can be downloaded from SAIC’s website. The agent at the window will scan all the documents and send them electronically to all relevant agencies. The business license is approved first and the two other agencies can give no charge (Fee their approval immediately after. They are notified online once the exempted for micro business license has been approved. and small size 11 days on 2 companies from 1/ BUSINESS LICENSE: average 2012 to 2014 - To obtain registration certification, the company must file a completed otherwise 0.08% of application form along with the following documents: • Notice of approval of company name registered capital) • Lease or other proof of company office. • Articles of association, executed by each shareholder • Representation authorization • Identity cards of shareholders and identification documents of officers • Appointment documents and identification documents (certifying name and address) of the directors, supervisors, and officers. • Appointment documents and identification documents of the company’s legal representative • If the initial contribution is in nonmonetary assets, the document certifying transfers of the property title of such assets Doing Business 2015 China 27 Time to No. Procedure Cost to complete complete • Other documents as required by the authorities According to the new administrative rules, application forms may be downloaded from the local government authorities’ Web sites. Statutory time limits were introduced for acceptance of application documents and for registration decision making, which differs according to the form of application. Documentation requirements for company registration were standardized. The Registry is now required to publicly display them. • According to Article 52, if an application is filed (by letter, telegraph, telex, fax, email, or electronic data exchange), the Company Registry must, within 5 days of receiving the relevant application documents and materials, decide whether to accept the application. If the application documents and materials are incomplete or do not meet the statutory requirements, the Registry must inform the applicant, within 5 days, of all contents subject to supplementation and correction. • According to Article 54, if the organ in charge of company registration must verify the application documents and materials, it shall decide whether to approve the registration within 15 days of acceptance. In other cases, the organ must decide whether to approve the registration on the spot or within 15 days of acceptance. • According to Article 55, if the organ decides to approve a company registration, it shall issue a “notice on approval for establishment registration” and inform the applicant to collect its business license within 10 days. The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. This includes the business registration fee (0.08% of the registered capital). 2/ ORGANIZATION CODE CERTIFICATE WITH THE QUALITY AND TECHNOLOGY SUPERVISION BUREAU: The company must apply for the organization code certificate within 30 days of obtaining the business license, by filing a completed application form with the Organization Code Management Center (a branch of the Quality and Technology Supervision Bureau) along with the following documents: • Business license (original and one copy) • Identity card of the legal representative (one copy) The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. The production cost of CNY 18 for Organization Code Certificate is exempted for a micro or a small size company. The remaining amount Doing Business 2015 China 28 Time to No. Procedure Cost to complete complete CNY 102 still needs to be paid to Quality and Technology Supervision Bureau for the technical service and production cost of IC card. 3/ REGISTRATION WITH LOCAL AND STATE TAXES: The tax registration procedures have been simplified since 2004 with the implementation of the Administration Measures of Tax Registration, issued by the State Taxation Bureau. Two separate taxation authorities still exist (the state taxation bureau and local taxation bureau). However, company founders are required to file tax registration only once, to either of these two authorities. The statutory time limit is 30 days from the date of receiving the registration application. The company must file the tax registration form and the initial tax reporting forms. Together with those forms, the company submits for review the following documents: • Business license duplicate (original and one copy) • Organization code certificate (original and one copy) • Identification card of the legal representative (original and one copy) • Identification card of the taxation personnel (original and one copy) • Company seal and financial seal • Office lease agreement and receipt(s) for rent paid • Articles of association (original and one copy) and bank-issued account-opening certificate (original and one copy) • Photocopy of property ownership certificate • Land use right certificate • Commitment letter regarding the authenticity of the documents submitted The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. At the time of picking up the business license they will also provide a receipt clearly stating when applicant should come back to get the other certificates (e.g. the organization code of certificate). Agency: SAIC (Single window) Obtain the approval to make a company seal from the police department If all the shareholders are individual investors, the registration file must include a duplicate of the business license (the original and one copy) 3 and the legal representative’s identification card. If registration is 2 days no charge approved, a notice to make the company seal will be issued to the company. Agency: Police Department Doing Business 2015 China 29 Time to No. Procedure Cost to complete complete Make a company seal Business founders can make a company seal at the Sealmaker for CNY 200-500. 2 days CNY 200-500 4 Agency: Seal maker Pay the fee for the organization code certificate issued by the RMB 30 (Production Quality and Technology Supervision Bureau at the time of pick-up cost of CNY 18 for Prior to picking up the organization code certificate issued by the Organization Code Quality and Technology Supervision Bureau and paying the associated Certificate is 5 2 days fees, the entrepreneur must obtain a company seal. exempted for micro and small size Agency: Quality and Technology Supervision Bureau companies from 2012 to 2014) Register with the local statistics bureau Within 30 days of obtaining the business license, the company must apply for statistics registration by submitting to the local statistics bureau a completed statistics registration form along with the following documents: 6 • Business license 1 day no charge • Organization code certificate Agency: Statistics bureau * Open a bank account The procedures and required documents for opening a company bank 1 day account and depositing the registered capital therein may vary (simultaneous with 7 depending on each bank’s practice. no charge previous procedure) Agency: Bank Apply for the authorization to print or purchase financial invoices/receipts no charge (Fee exempted for micro 8 After registering for state and local taxes and obtaining a Tax 10 days and small size Registration Certificate, the company must apply separately to the State companies from and Local Taxation Offices (respectively) for approval to purchase and 2012 to 2014) issue financial invoices/receipts. The Taxation Authority will issue an Doing Business 2015 China 30 Time to No. Procedure Cost to complete complete invoice purchasing book, if it agrees to grant the company such a qualification, upon reviewing the following submitted documents: • Tax registration certificate • Identity card of taxation personnel • Application forms • Models of invoice seal Agency: Tax Authority Purchase uniform invoices The company must obtain and submit an application form to purchase uniform invoices (购用统一发票申请单). The form and the authorization book (from Procedure 10) must be submitted to the Tax Office. no charge (Fee The VAT and ordinary invoices are published by the Tax Authority for anti-forgery reasons (with a few exceptions). Taxpayers buy VAT and exempted for micro ordinary invoices from the tax authority. and small size companies from 9 1 day The Notice on the Exemption of Some Administrative Fees for Small 2012 to 2014 - and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of otherwise CNY Finance and the National Development and Reform Commission, 1.05-1.67 per book exempts micro and small size companies from paying several of invoices) administrative fees between January 1, 2012 and December 31, 2014. Agency: Tax Authority File for recruitment registration with the Ministry of Human Resources and Social Security Within 30 days of recruiting employees, a new company must register with the Ministry of Human Resources and Social Security. Relevant 10 application forms can be electronically downloaded or obtained from 1 day no charge the office. Agency: Ministry of Human Resources and Social Security * Register with Social Welfare Insurance Center Within 30 days of establishment, the company must register for the payment of employee social insurance with the local social insurance 1 day office by submitting a completed social insurance registration form and (simultaneous with 11 the following documents: no charge previous • Company seal procedure) • Duplicate of business license (original and one copy) • Organization code certificate (original and one copy) After all of these documents have been verified, the authorities will Doing Business 2015 China 31 Time to No. Procedure Cost to complete complete issue a notice to open a social insurance account for the company. The company must then apply to open a special account at the designated bank or use the existing one. The local social insurance office will issue the social insurance registration card to the company upon receiving bank notification of account opening. Agency: Social Welfare Insurance Center * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 China 32 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 China 33 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build an economy, except for 11 economies for which the data a warehouse in China? According to data collected by are a population-weighted average of the 2 largest Doing Business, dealing with construction permits there business cities. See the chapter on distance to frontier requires 22.0 procedures, takes 244.3 days and costs and ease of doing business ranking at the end of this 7.6% of the warehouse value (figure 3.1). Most indicator profile for more details. sets refer to a case scenario in the largest business city of Figure 3.1 What it takes to comply with formalities to build a warehouse in China - Shanghai Doing Business 2015 China 34 What it takes to comply with formalities to build a warehouse in China - Beijing Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 China 35 DEALING WITH CONSTRUCTION PERMITS Globally, China stands at 179 in the ranking of 189 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in China to legally build a warehouse. Figure 3.2 How China and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 China 36 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in China (table 3.1)? Table 3.1 How has China made dealing with construction permits easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform China simplified the process of obtaining a construction DB2013 permit by streamlining and centralizing preconstruction approvals. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 China 37 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for China are based on BUILDING A WAREHOUSE a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction CNY 2,085,162 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Shanghai, Beijing service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in China - Shanghai Time to No. Procedure Cost to complete complete Request and obtain an environmental evaluation In the case considered here, BuildCo must submit an environmental impact assessment (环境影响报告表). Effective January 1, 2006, the approval of environmental evaluation form can be obtained at no cost in 30 days. The following documents are required for application: - Application form for environmental impact assessment - Business license - Filing opinion and statement of situation - Topographical map 1 - Ichonographical map 30 days no charge - Environmental impact assessment form - Opinions of related units, experts and the public, if the project may affect the environment greatly - The location opinion issued by the planning authorities - Request of planning and design - Opinion of industry administration department - Drainage license or drainage certificate; sewage treatment certificate if others are appointed to transport sewage Agency: Bureau of Environmental Protection Request and obtain land use and various planning conditions approvals As of 2011, the Shanghai Urban Construction and Communications Commission obtains the approvals for the project proposal, project 20 days no charge 2 planning and design, notification on the review of the design plan, and two planning permits for using land on behalf of the applicant. The following documents are required to apply for these approvals: • Application form, planning and design project for construction Doing Business 2015 China 38 Time to No. Procedure Cost to complete complete • Topographical map（地形图 • Ichnographic map（平面图 • Scheme drawing (方案图）and instruction of design • Form, Area of layers (分层面积表) • Approval of the feasibility study report or other relevant approval • Approval of request of construction project planning and design (建设工程规划设计要求通知单) • Other relevant documents and drawings required in the notice of request for construction project planning and design Agency: Shanghai Urban Construction and Communications Commission Request and obtain construction project planning permit Documents needed for construction on self-owned land include the following: - Application form - Construction project commitment letter - 1/500 or 1/1000 site-plan and 1/500 or 1/1000 (1/2000 for suburbs) terrain map - Working drawing - Form of strata area - Groundwork construction ichnographic map, groundwork detail 35 days no charge 3 drawing and piling plan drawing - Ichnographic sketch map used for public purposes - Construction budget plan - Preliminary design documents that are approved - Reply on planning design proposal and attached drawings - Opinion on review and filing of design documents and acceptance letter for drawing review Agency: Shanghai Bureau of Planning and Land and Resources Request and obtain evidence of capital from bank 4 1 day no charge Agency: Commercial Bank * Hire an authorized supervision agency BuildCo must hire a supervision agency to supervise and ensure the quality and safety of the construction. There is no uniform price for hiring a supervisor. The cost should be calculated as follows: 1 day CNY 156,021 5 1. Designing step: if the budgetary estimate of the project design is less than CNY 5,000,000.00, the cost is calculated as 0.44 % (1,279,322 x 0.44%= CNY 5,629) of the budgetary estimate of the project design. 2. Building and repairing step: if the budgetary estimate of the project building and repairing is less than CNY 5,000,000.00, the cost is calculated as 3.3% (1,279,322 x 3.3% = CNY 42,217.6) of the budgetary estimate. The new value is CNY 42,217.6 + CNY 5,629 = CNY 47,846.6. Doing Business 2015 China 39 Time to No. Procedure Cost to complete complete Additionally builders need to pay CNY 78,036.00 (CNY 60.00 per square meter) for designs to be presented to the People's Civil Defense office. These calculations are according to the Notice on the Standard of Industry-Directed Price for the Construction Supervision Agency Fees of Shanghai’ (Hu Jiang Jiang Xiezi [2001], No. 20, effective January 1, 2002). Agency: Authorized Supervision Agency * Register construction drawings at the Civil Defense Office Commercial warehouses do not need approval by the Civil Defense Office. However, the builder still needs to present the design of the warehouse for registration and filing. This needs to be prepared by an 10 days no charge 6 authorized supervision agency. Agency: Civil Defense Office * Obtain review of building drawings by a building drawing examiner authorized by the Shanghai Construction Project Document Review Center (Construction Committee) and obtain a letter of notice The building drawing review and fee collection occur simultaneously with the issuance of the construction project planning permit. 7 As of 2012, the Shanghai District Construction Commission accepts the 20 days no charge building drawings and coordinates the review among the various agencies, including the Fire Protection Bureau, the Shanghai Police and Traffic Police District Level Team and Shanghai City Appearance & Environmental Sanitation Administration Bureau. Agency: Shanghai Construction Project Document Review Center * Register for direct contracting of design and construction 8 1 day CNY 1,251 Agency: District Tendering Office * Have the building contractor and supervisor seal the application form 9 1 day no charge Agency: Building Contractor and Supervisor Doing Business 2015 China 40 Time to No. Procedure Cost to complete complete Request and obtain building permit To request a building permit, BuildCo must file the following documents: - Application form for building construction permit - "IC Card of Shanghai Construction Project" - Land use permit for construction purpose or title certificates of land or property - Planning permit for the construction project - Evidence of payment to the general contractor through project specialized account - Construction contract with contractor - Bid winning notice for construction - Customer Receipt of the Openning Account for the salary of the 21 days no charge 10 workers of the general contractor - Certificate of quality and safety operation of Shanghai Construction Project - The statement form for the site of the construction project - Document evidencing that the site has completed building relocation (项目场地内完成动迁的证明材料) The office registers on BuildCo’s behalf for quality and safety monitoring and issues a notice. The statutory time limit for this procedure is 15 working days. Agency: Shanghai Urban Construction and Communications Commission Request and receive fire department inspection upon building completion The application can be submitted directly to the Shanghai District Construction Commission which now coordinates all inspections. But 15 days no charge 11 the inspections are still conducted by each individual agency. Agency: Fire Department Request and obtain certificate of the completed construction from the fire department Pursuant to "Administration Rules on Supervision of Construction Project Fire Prevention" (effective from May 1, 2009)《建设工程消防监督管理规定》, BuildCo must request the certificate of the completed construction from the Fire Department within 7 days from the time of inspection. The documents required for submission are: 12 15 days no charge - Application form for certificate of the completed construction - Voucher for filing documents of fire design (建设工程消防设计备案检查材料受理凭证) and certificate for examination of building map of construction project (建设工程施工图设计审查通过证书) ; - Inspection report for fire facility of construction (上海市建筑消防设施检测报告) - Notice on examination of sampling of decoration material (室内装修材料见证取样检验结果通知单) Doing Business 2015 China 41 Time to No. Procedure Cost to complete complete - Quality inspection report on fire-proof spraying of steel structure 钢结构防火喷涂工程施工质量检测报告 - List of fire products - BuildCo's business license - License of construction, supervision and test companies Agency: Fire Department Receive "Four-Party" inspection This procedure is called a four-party inspection (四方验收). The four parties include the site inspector, the designer, the builder, and the 13 supervisor. 1 day no charge Agency: Site Inspector, Designer, Builder, and Agency Supervisor * Receive inspection of the completed construction from the Shanghai Bureau of Planning and Land and Resources To request a final inspection, BuildCo must submit the following documents: - Report on completed construction (建设工程竣工测量成果报告书) - Planning permit for the construction project and attached drawings (plan, vertical view and cutaway view) - Qualified acceptance certificate of files of construction project (建设项目档案验收合格证) 14 - Qualified acceptance form of civil defense project 10 days no charge However, this application can be submitted directly to the Shanghai District Construction Commission which now coordinates all inspections. But the inspections are still conducted by each individual agency. Agency: Shanghai Bureau of Planning and Land and Resources Request opinion on whether construction project is lightning- proof To obtain an opinion, BuildCo must submit the following documents: - Application form - Project approval - Examination opinion of design of lightning-proof facilities - Inspection report of lightning-proof project of construction project 14 days no charge 15 - As-constructed drawing of lightning-proof facilities - Testing report of lightning-proof products issued by qualified testing institution - Project contract with professional lightning-proof company Agency: Shanghai Lightning Protection Center Doing Business 2015 China 42 Time to No. Procedure Cost to complete complete * Receive inspection of the completed construction from the Environmental Protection Department To receive a final environmental inspection, BuildCo must submit these required documents: - Application for completed construction inspection - Environment inspection report - Business license or personal ID - Trial operation approval document (if applicable) - Approval of environmental impact assessment - Evidencing document for sewage treatment 16 - Application form for dissembling, using and disposing electronic 30 days no charge waste The time limit is 30 days from the receipt of application, according to the Environment Protection Bureau Web site. However, this application can be submitted directly to the Shanghai District Construction Commission which now coordinates all inspections. But the inspections are still conducted by each individual agency. Agency: Environmental Protection Department * Request and receive inspection on construction completion (竣工备案) from the Shanghai Urban Construction and Communications Commission This procedure must be completed on the day of application, provided that the documents required for submission are complete. There is no 1 day no charge 17 charge for this procedure. Agency: Shanghai Urban Construction and Communications Commission Request and obtain certificate of completion and certificate of final inspection from the Shanghai Urban Construction and Communications Commission Within 15 days after the building passes the inspection, BuildCo must file the following documents with the Shanghai Urban Construction and Communications Commission: - Inspection report of the completed construction - Acknowledgement or authority from the planning bureau - Acceptance certificate or opinion on acceptance of fire-prevention 18 inspection 21 days no charge - Acknowledgement from the environmental protection bureau - Acknowledgement from the city construction dossier department - Opinion on acceptance of lightning-proof construction project issued by Shanghai Lightning Protection Center - Proof of payment of engineering section - Opinion on acceptance of completed civil defense project Agency: Shanghai Urban Construction and Communications Commission Doing Business 2015 China 43 Time to No. Procedure Cost to complete complete Obtain water connection inquiry and request water and sewage connection BuildCo must first apply for a water connection inquiry (接水前期征询手续) from the Municipal Water Bureau who will approve 19 the application within 7 days after receiving all required documents. 7 days no charge Afterwards, BuildCo may apply for the water connection. Agency: Municipal Water Bureau Receive water and sewage inspection Upon receiving the water supply application, the water service crew conducts on-site surveys within 7 days. The completion of water supply is determined by construction conditions. As for sewage licensing, the Municipal Water Bureau needs 20 days after BuildCo submits the project approval and other documents on the sewage facility design to 20 conduct a preliminary inspection. After completing the inspection and 1 day no charge trial operation, the bureau requires 20 days to examine the results of the facility and grant approval. These timeframes are taken into account in the following procedure. Agency: Municipal Water Bureau Receive connection to water and sewage services 21 49 days no charge Agency: Municipal Water Bureau * Register building with Real Estate Registry The warehouse considered here should fall into the category of nonresidential real property, in which case the registry procedure will take 20 working days from receipt of the application. Pursuant to Notice on Relevant Issues on Calculating Methods and Fee Standards of the House Registration Fee (effective on Apr 25, 22 2008)《上海市物价局、上海市财政局关于规范本市房屋登记费计费方式 30 days CNY 550 和收费标准等有关问题的通知》, for nonresidential real property, the registration fee is CNY 550. Before selling the building, the property must be registered and the certificate obtained. Agency: Shanghai District Real Estate Registry * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2015 China 44 Source: Doing Business database. Summary of time, cost and procedures for dealing with construction permits in China - Beijing Time to No. Procedure Cost to complete complete Request and obtain an environmental evaluation In the case considered here, BuildCo must submit an environmental impact assessment (环境影响报告表). Effective January 1, 2006, the approval of environmental evaluation form can be obtained at no cost in 30 days. The following documents are required for application: - Application form for environmental impact assessment - Business license - Filing opinion and statement of situation - Topographical map 1 - Ichonographical map 20 days no charge - Environmental impact assessment form - Opinions of related units, experts and the public, if the project may affect the environment greatly - The location opinion issued by the planning authorities - Request of planning and design - Opinion of industry administration department - Drainage license or drainage certificate; sewage treatment certificate if others are appointed to transport sewage Agency: Bureau of Environmental Protection Request and obtain land use and various planning conditions approvals As of 2011, the Beijing Urban Construction and Communications Commission obtains the approvals for the project proposal, project planning and design, notification on the review of the design plan, and two planning permits for using land on behalf of the applicant. The following documents are required to apply for these approvals: • Application form, planning and design project for construction • Topographical map（地形图 2 • Ichnographic map（平面图 14 days no charge • Scheme drawing (方案图）and instruction of design • Form, Area of layers (分层面积表) • Approval of the feasibility study report or other relevant approval • Approval of request of construction project planning and design (建设工程规划设计要求通知单) • Other relevant documents and drawings required in the notice of request for construction project planning and design Agency: Beijing Urban Construction and Communications Commission Request and obtain construction project planning permit 3 Documents needed for construction on self-owned land include the 20 days no charge following: - Application form Doing Business 2015 China 45 Time to No. Procedure Cost to complete complete - Construction project commitment letter - 1/500 or 1/1000 site-plan and 1/500 or 1/1000 (1/2000 for suburbs) terrain map - Working drawing - Form of strata area - Groundwork construction ichnographic map, groundwork detail drawing and piling plan drawing - Ichnographic sketch map used for public purposes - Construction budget plan - Preliminary design documents that are approved - Reply on planning design proposal and attached drawings - Opinion on review and filing of design documents and acceptance letter for drawing review Agency: Beijing Bureau of Planning and Land and Resources Request and obtain evidence of capital from bank 4 1 day no charge Agency: Commercial Bank * Hire an authorized supervision agency There is no uniform price for hiring a supervisor. The cost should be calculated as follows: 1. Designing step: if the budgetary estimate of the project design is less than CNY 5,000,000.00, the cost is calculated as 0.44% of the budgetary estimate of the project design. 2. Building and repairing step: if the budgetary estimate of the project building and repairing is less than CNY 5,000,000.00, the cost is calculated as 3.3% of the budgetary estimate. 1 day CNY 156,021 5 3. Additionally builders need to pay CNY 60.00 per square meter for designs to be presented to the People's Civil Defense office. These calculations are according to the Notice on the Standard of Industry-Directed Price for the Construction Supervision Agency Fees of Beijing’ (Hu Jiang Jiang Xiezi [2001], No. 20, effective January 1, 2002). Agency: Authorized Supervision Agency * Register construction drawings at the Civil Defense Office Commercial warehouses do not need approval by the Civil Defense Office. However, the builder still needs to present the design of the warehouse for registration and filing. This needs to be prepared by an 10 days no charge 6 authorized supervision agency. Agency: Civil Defense Office Doing Business 2015 China 46 Time to No. Procedure Cost to complete complete * Obtain review of building drawings by a building drawing examiner authorized by the Beijing Construction Project Document Review Center (Construction Committee) and obtain a letter of notice The building drawing review and fee collection occur simultaneously with the issuance of the construction project planning permit. 7 As of 2012, the Beijing District Construction Commission accepts the 20 days no charge building drawings and coordinates the review among the various agencies, including the Fire Protection Bureau, the Beijing Police and Traffic Police District Level Team and Beijing City Appearance & Environmental Sanitation Administration Bureau. Agency: Beijing Construction Project Document Review Center * Register for direct contracting of design and construction 8 1 day CNY 1,251 Agency: District Tendering Office * Have the building contractor and supervisor seal the application form 9 1 day no charge Agency: Building Contractor and Supervisor Request and obtain building permit To request a building permit, BuildCo must file the following documents: - Application form for building construction permit - IC Card of Beijing Construction Project - Land use permit for construction purpose or title certificates of land or property - Planning permit for the construction project - Evidence of payment to the general contractor through project specialized account - Construction contract with contractor 14 days no charge 10 - Bid winning notice for construction - Customer Receipt of the Opening Account for the salary of the workers of the general contractor - Certificate of quality and safety operation of Beijing Construction Project - The statement form for the site of the construction project - Document evidencing that the site has completed building relocation (项目场地内完成动迁的证明材料) The office registers on BuildCo’s behalf for quality and safety monitoring and issues a notice. The statutory time limit for this procedure is 15 working days. Doing Business 2015 China 47 Time to No. Procedure Cost to complete complete Agency: Beijing Urban Construction and Communications Commission Request and receive Fire Department inspection upon building completion The application can be submitted directly to the Beijing District Construction Commission which now coordinates all inspections. But 9 days no charge 11 the inspections are still conducted by each individual agency. Agency: Fire Department Request and obtain certificate of the completed construction from the Fire Department Pursuant to "Administration Rules on Supervision of Construction Project Fire Prevention" (effective from May 1, 2009)《建设工程消防监督管理规定》, BuildCo must request the certificate of the completed construction from the Fire Department within 7 days from the time of inspection. The documents required for submission are: - Application form for certificate of the completed construction - Voucher for filing documents of fire design (建设工程消防设计备案检查材料受理凭证) and certificate for examination of building map of construction project 12 (建设工程施工图设计审查通过证书) ; 9 days no charge - Inspection report for fire facility of construction (上海市建筑消防设施检测报告) - Notice on examination of sampling of decoration material (室内装修材料见证取样检验结果通知单) - Quality inspection report on fire-proof spraying of steel structure 钢结构防火喷涂工程施工质量检测报告 - List of fire products - BuildCo's business license - License of construction, supervision and test companies Agency: Fire Department Receive "Four-Party" inspection This procedure is called a four-party inspection (四方验收). The four parties include the site inspector, the designer, the builder, and the 13 supervisor. 1 day no charge Agency: Site Inspector, Designer, Builder, and Agency Supervisor Doing Business 2015 China 48 Time to No. Procedure Cost to complete complete * Receive inspection of the completed construction from the Beijing Bureau of Planning and Land and Resources To request a final inspection, BuildCo must submit the following documents: - Report on completed construction (建设工程竣工测量成果报告书) - Planning permit for the construction project and attached drawings (plan, vertical view and cutaway view) - Qualified acceptance certificate of files of construction project (建设项目档案验收合格证) 10 days no charge 14 - Qualified acceptance form of civil defense project However, this application can be submitted directly to the Beijing District Construction Commission which now coordinates all inspections. But the inspections are still conducted by each individual agency. Agency: Beijing Bureau of Planning and Land and Resources Request opinion on whether construction project is lightning- proof To obtain an opinion, BuildCo must submit the following documents: - Application form - Project approval - Examination opinion of design of lightning-proof facilities - Inspection report of lightning-proof project of construction project 14 days no charge 15 - As-constructed drawing of lightning-proof facilities - Testing report of lightning-proof products issued by qualified testing institution - Project contract with professional lightning-proof company Agency: Beijing Lightning Protection Center * Receive inspection of the completed construction from the Environmental Protection Department To receive a final environmental inspection, BuildCo must submit these required documents: - Application for completed construction inspection - Environment inspection report - Business license or personal ID - Trial operation approval document (if applicable) - Approval of environmental impact assessment 10 days no charge 16 - Evidencing document for sewage treatment - Application form for dissembling, using and disposing electronic waste The time limit is 30 days from the receipt of application, according to the Environment Protection Bureau Web site. However, this application can be submitted directly to the Beijing District Construction Commission which now coordinates all inspections. But the inspections are still conducted by each individual agency. Doing Business 2015 China 49 Time to No. Procedure Cost to complete complete Agency: Environmental Protection Department * Request and receive inspection on construction completion (竣工备案) from the Beijing Urban Construction and Communications Commission This procedure must be completed on the day of application, provided 17 that the documents required for submission are complete. There is no 1 day no charge charge for this procedure. Agency: Beijing Urban Construction and Communications Commission Request and obtain certificate of completion and certificate of final inspection from the Beijing Urban Construction and Communications Commission Within 15 days after the building passes the inspection, BuildCo must file the following documents with the Beijing Urban Construction and Communications Commission: - Inspection report of the completed construction - Acknowledgement or authority from the planning bureau - Acceptance certificate or opinion on acceptance of fire-prevention 18 inspection 21 days no charge - Acknowledgement from the environmental protection bureau - Acknowledgement from the city construction dossier department - Opinion on acceptance of lightning-proof construction project issued by Beijing Lightning Protection Center - Proof of payment of engineering section - Opinion on acceptance of completed civil defense project Agency: Beijing Urban Construction and Communications Commission Obtain water connection inquiry and request water and sewage connection BuildCo must first apply for a water connection inquiry (接水前期征询手续) from the Municipal Water Bureau who will approve 19 the application within 7 days after receiving all required documents. 7 days no charge Afterwards, BuildCo may apply for the water connection. Agency: Municipal Water Bureau Receive water and sewage inspection Upon receiving the water supply application, the water service crew 20 conducts on-site surveys within 7 days. The completion of water supply 1 day no charge is determined by construction conditions. As for sewage licensing, the Municipal Water Bureau needs 20 days after BuildCo submits the project approval and other documents on the sewage facility design to Doing Business 2015 China 50 Time to No. Procedure Cost to complete complete conduct a preliminary inspection. After completing the inspection and trial operation, the bureau requires 20 days to examine the results of the facility and grant approval. These timeframes are taken into account in the following procedure. Agency: Municipal Water Bureau Receive connection to water and sewage services 21 49 days no charge Agency: Municipal Water Bureau * Register building with Real Estate Registry The warehouse considered here should fall into the category of nonresidential real property, in which case the registry procedure will take 20 working days from receipt of the application. Pursuant to Notice on Relevant Issues on Calculating Methods and Fee Standards of the House Registration Fee (effective on Apr 25, 22 2008)《上海市物价局、上海市财政局关于规范本市房屋登记费计费方式 30 days CNY 550 和收费标准等有关问题的通知》, for nonresidential real property, the registration fee is CNY 550. Before selling the building, the property must be registered and the certificate obtained. Agency: Beijing District Real Estate Registry * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 China 51 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 China 52 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in China? According to data collected by Doing Business, business city of an economy, except for 11 economies for getting electricity there requires 5.5 procedures, takes which the data are a population-weighted average of the 143.2 days and costs 459.4% of income per capita (figure 2 largest business cities. See the chapter on distance to 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in China - Shanghai What it takes to obtain an electricity connection in China - Beijing Doing Business 2015 China 53 Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 China 54 GETTING ELECTRICITY Globally, China stands at 124 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in China to connect a The rankings for comparator economies and the regional warehouse to electricity. Figure 4.2 How China and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 China 55 GETTING ELECTRICITY What are the details? The indicators reported here for China are based on a set OBTAINING AN ELECTRICITY CONNECTION of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility—identified by Name of utility - State Grid Beijing Electric Doing Business. Data are collected from the distribution Beijing: Power Company utility, then completed and verified by electricity regulatory agencies and independent professionals such Name of utility - Shanghai Municipal as electrical engineers, electrical contractors and Shanghai: Electric Power Company construction companies. The electricity distribution utility surveyed is the one serving the area (or areas) in which City: Shanghai, Beijing warehouses are located. If there is a choice of distribution utilities, the one serving the largest number The procedures are those that apply to a warehouse and of customers is selected. electricity connection matching the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in China - Shanghai Time to No. Procedure Cost to complete complete Submit application to Shanghai Municipal Electric Power Company and await power supply plan and estimate Documents to be submitted along with application - One copy of each business license, tax registration certificate and organizational code 61 calendar days CNY 0 1 registration certificate, Clearance certificate from Planning Authority. Agency: Shanghai Municipal Electric Power Company Submit estimate payment to Shanghai Municipal Electric Power Company, and get project design plans for external connection reviewed Costs include - cable-laying work: for example cable-laying on supports along the walls, 3-phase and 5-level Y, voltage 220/380V, 140 kVA, normally need 4×70+1×35 bus, YJV200 Model armored installation, 14 calendar days CNY 3,700 2 flame retardant, about 324 Yuan/meter Electricity meter and installation, Mutual inductor: 3 sets are needed, 200:5. Three-phase mains: one 250A, ABB or Schneider Model, Power distribution box. Agency: Shanghai Municipal Electric Power Company Doing Business 2015 China 56 Time to No. Procedure Cost to complete complete Purchase material and conduct installation Materials to be purchased by customer include Transformer, high- voltage switch cabinet, low-voltage switch cabinet, wires, cable and other accessories. Materials are available locally in Shanghai but it takes 30-45 45 calendar days CNY 187,790 3 days to produce the tailor-made high and low voltage switch cabinets. Agency: Electrical Contractor Submit report to Shanghai Municipal Electric Power Company and await final internal and external inspection Shanghai Municipal Electric Power Company staff provides internal 4 wiring inspection and inspection of external installation. 14 calendar days CNY 0 Agency: Shanghai Municipal Electric Power Company Receive installation of meter and connection to grid Shanghai Municipal Electric Power Company provides meter installation and connection to grid. 11 calendar days CNY 0 5 Agency: Shanghai Municipal Electric Power Company * Takes place simultaneously with another procedure. Source: Doing Business database. Summary of time, cost and procedures for getting electricity in China - Beijing Time to No. Procedure Cost to complete complete Submit application to State Grid Beijing Electric Power Company and await power supply plan and estimate Documents to be submitted along with application - One copy of each business license, tax registration certificate and organizational code 60 calendar days CNY 0 1 registration certificate, Clearance certificate from Planning Authority. Agency: State Grid Beijing Electric Power Company * The State Grid Beijing Electrical Power Company conducts external site inspection 2 11 calendar days CNY 0 Agency: State Grid Beijing Electrical Power Company Doing Business 2015 China 57 Time to No. Procedure Cost to complete complete Submit estimate payment to State grid Beijing electric power company, and get project design plans for external connection reviewed Costs include - cable-laying work: for example cable-laying on supports along the walls, 3-phase and 5-level Y, voltage 220/380V, 140 kVA, normally need 4×70+1×35 bus, YJV200 Model armored installation, 14 calendar days CNY 3,600 3 flame retardant, Electricity meter and installation, Mutual inductor: 3 sets are needed, 200:5. Three-phase mains: one 250A, ABB or Schneider Model, Power distribution box. Agency: State Grid Beijing Electric Power Company Purchase material and conduct installation Materials to be purchased by customer include Transformer, high- voltage switch cabinet, low-voltage switch cabinet, wires, cable and other 4 accessories. 50 calendar days CNY 188,100 Agency: Customer's electrical contractor Submit report to State Grid Beijing Electric Power Company and await final external inspection State Grid Beijing Electric Power Company staff provides inspection of 5 external installation. 14 calendar days CNY 0 Agency: State Grid Beijing Electric Power Company Receive installation of meter and connection to grid State Grid Beijing Electric Power Company provides meter installation and connection to grid. 3 calendar days CNY 0 6 Agency: State Grid Beijing Electric Power Company * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 China 58 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 China 59 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest China? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 4.0 procedures, takes which the data are a population-weighted average of the 19.4 days and costs 3.6% of the property value (figure 2 largest business cities. See the chapter on distance to 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in China - Shanghai What it takes to register property in China - Beijing Doing Business 2015 China 60 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 China 61 REGISTERING PROPERTY Globally, China stands at 37 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in China to transfer property. Figure 5.2 How China and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 China 62 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: CNY 2,085,162 notaries and property registries. These procedures are those that apply to a transaction matching the City: Shanghai, Beijing standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in China Time to No. Procedure Cost to complete complete Parties enter into contract and pay taxes "The parties negotiate and sign the sale and purchase contract relating to the transfer of property. There is a standard sale and purchase contract formulated by government authorities and is required to be submitted for registration in practice. However, the standard sale and purchase contract can be revised or supplemented with the supplementary terms or a supplementary agreement as appendix. The parties shall print out the standard sale and purchase contract at the designated printer available at the real estate registry office or licensed real estate brokers. Officials in the Real Estate Registry will review the "Deed tax: 3% of purchase price specified in the sale and purchase contract to make sure property value to the price is generally in line with the market price. be paid by the buyer Stamp duty: After the review of the price, the parties shall pay the deed tax (note: the 1 day 0.05％ of property 1 3% tax is called “deed tax” in China) and stamp duty at the Tax Bureau value to be paid Window (the local tax authorities might have a window in most real by buyer and seller estate registry offices in Shanghai) based on the reviewed purchase price. separately (total 0.1%)" The deed tax is 3% of the property value to be paid by the buyer, while the stamp duty is 0.05% of property value to be paid each by buyer and seller (total 0.1%). Some real estate registry offices in Shanghai do not collect stamp duty from companies. In such a case, both the seller and the buyer will have to pay stamp duty to the tax authorities with jurisdiction over them." Agency: Real Estate Registry Doing Business 2015 China 63 Time to No. Procedure Cost to complete complete Parties file the application at the Real Estate Registry "Private ownership of land is not permitted in China; all land is subject to either State ownership or collective ownership. However, a private party is entitled to obtain the right to use the land. Regarding the State-owned land, there are two types of land use rights, the “granted land use right” and the “allocated land use right”. The difference is that the granted land use right is limited in time against payment, whereas the allocated land use right is usually given for free with no time limit, but for specific purposes only. A private party also may transfer to another private party the granted land use right. The allocated land use right cannot be commercially transferable before being converted into granted land use right. In this case, the land is used for commercial purposes. Usually land for commercial use is owned by the State, and the relevant land use right is the State-owned land use right. As to the term of the land use right in this case the buyer, who will use the land for commercial purposes, will only get 40 years as the initial term (as maximum unless it extends the granted land use rights at the end of the 40 year period by paying to the State the additional land price) minus the period from the granting date from the State to the date of the transfer to ABC. If the land is zoned for industrial use or warehousing use rather than for commercial use, the maximum land tenure should be 50 years. There is a standard form sale and purchase agreement formulated by government authorities and is required to be used in practice. The contents of the standard form agreement may be revised or 7 days 2 supplemented by way of a supplemental agreement attached to the (simultaneous No cost standard form agreement as appendix. The sale and purchase agreement with procedure 3) needs to be printed at designated printers. Such printers are only available at licensed real estate brokers and the property registry offices. Property Ownership Certificate and Land Use Right Certificate are combined into one certificate in Shanghai, which is called ""Real Estate Title Certificate"". The documentation shall include: The seller and the buyer should submit one original real estate sales and purchase contract (duly signed) and a writing representation of the seller and buyer regarding the title transfer. There is no standard form of the contract (except for newly constructed commercial residential properties) nor is the participation of a lawyer/notary required. The seller should submit the below documents: (i) The original copy of the Property Ownership Certificate and Land Use Right Certificate ""Real Estate Title Certificate"" (already in possession of the seller); (ii) The original copy of the Business License or Organization Code Certificate; (iii) The original copy of the Board resolution approving the sales of the real estate; (iv) District Branch-dedicated Form for proof of legal representative’s authority, and photocopy of the identification card (or passport) of the legal representative; and (v) Photocopy of the identification card of the individual authorized to handle the actual procedures, and the original copy of Power of Attorney. The buyer should submit the below documents: (i) Real Estate Ownership Registration Form; (ii) The original copy of the Business License or Organization Code Certificate; (iii) The original copy of the Board resolution approving the purchase of the real estate; (iv) District Branch-dedicated Form for proof of legal Doing Business 2015 China 64 Time to No. Procedure Cost to complete complete representative’s authority, and photocopy of the identification card (or passport) of the legal representative; And (v) Photocopy of the identification card of the individual authorized to handle the actual procedures, and the original copy of Power of Attorney. " Agency: Real Estate Registry * Parties pay registration fee "The registration fee is paid at a separate window from that where one picks up the new title certificate. The Ministry of Finance and State Development and Reform Commission issued a notice, effective from May 1st 2008, to standardize the registration fees for real estate property. The registration fee is set at CNY 80 for one piece of residential housing and CNY 550 for one piece of non-residential building. The registration fee is decided by piece, not value of the property. The CNY 550 + 1 day transaction handling fee of 0.5% of the transaction price shall by paid by transaction 3 (simultaneous the buyer, together with registration fees, according to No.hfdj[1996]744 handling fee of with procedure 2) Notice from Shanghai Building and Land Administration Bureau dated 0.5% of sales price Sep 17,1996. The handling fee is mandatory and is made at the same time when the registration fee is paid. The payment is received by the Real Estate Registry." Agency: Commercial bank located in the House and Land Resources Bureau Parties submit the tax receipt and pick up new title certificate After paying the registration fee, along with the receipt, the buyer obtains the new Real Estate Title Certificate. In Shanghai the former Property Ownership Certificate and the Land Use Right Certificate have been combined into one certificate, the Real Estate Title Certificate. The 1 day No cost 4 title transfer procedure will be complete upon the issuance of the new Real Estate Title Certificate. Agency: Real Estate Registry * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 China 65 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 China 66 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, China stands at 71 in the ranking of 189 and bankruptcy laws in China facilitate access to credit? economies on the ease of getting credit (figure 6.1). The The economy has a score of 6 on the depth of credit rankings for comparator economies and the regional information index and a score of 4 on the strength of average ranking provide other useful information for legal rights index (see the summary of scoring at the end assessing how well regulations and institutions in China of this chapter for details). Higher scores indicate more support lending and borrowing. credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How China and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 China 67 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for China and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 China 68 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in China (table 6.1)? Table 6.1 How has China made getting credit easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform China improved its credit information system by introducing DB2014 credit information industry regulations, which guarantee borrowers’ right to inspect their data. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 China 69 GETTING CREDIT What are the details? The getting credit indicators reported here for China are The data on the legal rights of borrowers and lenders are based on detailed information collected in that economy. gathered through a survey of financial lawyers and The data on credit information sharing are collected verified through analysis of laws and regulations as well through a survey of a credit registry and/or credit bureau as public sources of information on collateral and (if one exists). To construct the depth of credit bankruptcy laws. For the strength of legal rights index, a information index, a score of 1 is assigned for each of 8 score of 1 is assigned for each of 10 aspects related to features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Shanghai Beijing Strength of legal rights index (0–12) Index score: 4 Index score: 4 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional No No equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description No No of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes Yes collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the No No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between Yes Yes parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non- incorporated entities, that is unified geographically and by asset type, with No No an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional No No equivalents can be registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any No No interested third party? Doing Business 2015 China 70 Shanghai Beijing Strength of legal rights index (0–12) Index score: 4 Index score: 4 Are secured creditors paid first (i.e. before tax claims and employee Yes Yes claims) when a debtor defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee Yes Yes claims) when a business is liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No No protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor No No to sell the collateral through public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 6 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on No Yes 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per No Yes 1 capita distributed? By law, do borrowers have the right to access their No Yes 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an No Yes 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or Doing Business 2015 China 71 covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 9,597,000 Number of individuals 0 320,000,000 Percent of total 0.0 33.2 Source: Doing Business database. Doing Business 2015 China 72 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 China 73 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in China? The economy has a score of 4.5 on not measure all aspects related to the protection of the strength of minority investor protection index, with a minority investors, a higher ranking does indicate that an higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, China stands at 132 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How China and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 China 74 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for China in 2014. A summary of scoring for the minority investors indicators into context is to see where protecting minority investors indicators at the end of this the economy stands in the distribution of scores across chapter provides details on how the indices were comparator economies. Figures 7.2 through 7.7 highlight calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 China 75 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 China 76 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 China 77 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 China 78 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for China are based on detailed information shareholder rights, governance structure and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2015 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for China. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in China Answer Score Answer Score (Shanghai) (Shanghai) (Beijing) (Beijing) Extent of disclosure index (0-10) 10.0 10.0 Shareholders Shareholders Which corporate body can provide legally sufficient approval excluding excluding 3 3 for the Buyer-Seller transaction? (0-3) interested interested parties parties Full disclosure Is disclosure by the interested director to the board of Full disclosure of 2 of all material 2 directors required? (0-2) all material facts facts Disclosure on Disclosure on the the transaction Is disclosure of the transaction in published periodic filings transaction and 2 and on the 2 (annual reports) required? (0-2) on the conflict of conflict of interest interest Disclosure on Disclosure on the the transaction Is immediate disclosure of the transaction to the public transaction and 2 and on the 2 and/or shareholders required? (0-2) on the conflict of conflict of interest interest Must an external body review the terms of the transaction Yes 1 Yes 1 before it takes place? (0-1) Extent of director liability index (0-10) 1.0 1.0 Can shareholders sue directly or derivatively for the damage Yes 1 Yes 1 caused by the Buyer-Seller transaction to the company? (0-1) Can shareholders hold the interested director liable for the Not liable 0 Not liable 0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Not liable 0 Not liable 0 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a No 0 No 0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0 No 0 plaintiff? (0-1) Doing Business 2015 China 79 Can both fines and imprisonment be applied against the No 0 No 0 interested indrector? (0-1) Only in case of Can a court void the transaction upon a successful claim by a Only in case of 0 fraud or bad 0 shareholder plaintiff? (0-2) fraud or bad faith faith Ease of shareholder suits index (0-10) 4.0 4.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1 Yes 1 (0-1) Can the plaintiff obtain any documents from the defendant No 0 No 0 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0 No 0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2 Yes 2 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1 Yes 1 criminal cases? (0-1) At the Can shareholder plaintiffs recover their legal expenses from At the discretion 0 discretion of 0 the company? (0-2) of the court the court Strength of minority investor protection index (0-10) 4.5 4.5 Extent of conflict of interest regulation index (0-10) 5.0 5.0 Extent of shareholder rights index (0-10.5) 3.0 3.0 Can shareholders amend company bylaws or statutes with a No 0 No 0 simple majority? Can shareholders owning 10% of the company's share No 0 No 0 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of directors Yes 1.5 Yes 1.5 before the end of their term. Must a company obtain its shareholders’ approval every time No 0 No 0 it issues new shares? Are shareholders automatically granted subscription rights Yes 1.5 Yes 1.5 on new shares? Must shareholders approve the election and dismissal of the No 0 No 0 external auditor? Can shareholders freely trade shares prior to a major No 0 No 0 corporate action or meeting of shareholders? Strength of governance structure index (0-10.5) 2.0 2.0 Is the CEO barred from also serving as chair of the board of Yes 1.5 Yes 1.5 directors? Must the board of directors include independent board Yes for listed Yes for listed 1 1 members? companies companies Must a company have a separate audit committee? No 0 No 0 Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected No 0 No 0 shares? Must a potential acquirer make a tender offer to all Yes for listed Yes for listed 1 1 shareholders upon acquiring 50% of a company? companies companies Is cross-shareholding between 2 independent companies No 0 No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its Yes 1.5 Yes 1.5 parent company? Doing Business 2015 China 80 Extent of corporate transparency index (0-9) 7.0 7.0 Yes for listed Yes for listed Must ownership stakes representing 10% be disclosed? 1 1 companies companies Must information about board members’ other directorships Yes for listed Yes for listed as well as basic information on their primary employment be 1 1 companies companies disclosed? Yes for listed Yes for listed Must the compensation of individual managers be disclosed? 1 1 companies companies Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties Yes 1.5 Yes 1.5 and other factors influencing the reporting? Must annual financial statements be audited by an external Yes for listed Yes for listed 1 1 auditor? companies companies Must audit reports be disclosed to the public? Yes 1.5 Yes 1.5 Extent of shareholder governance index (0-10) 4.0 4.0 Source: Doing Business database. Doing Business 2015 China PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paid by the and mandatory contributions paid during company. the second year of operation are recorded.  A range of standard deductions and  Taxes and mandatory contributions are exemptions are also recorded. measured at all levels of government. 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 China 82 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in China—and how much do firms pay in taxes? On frontier and ease of doing business ranking at the end of average, firms make 7.0 tax payments a year, spend this profile for more details. 261.0 hours a year filing, preparing and paying taxes and Globally, China stands at 120 in the ranking of 189 pay total taxes amounting to 64.6% of profit (see the economies on the ease of paying taxes (figure 8.1). The summary at the end of this chapter for details). Most rankings for comparator economies and the regional indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the China. Figure 8.1 How China and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 China 83 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in China payments or offering electronic filing and payment. (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has China made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform China’s new corporate income tax law unified the tax regimes for domestic and foreign enterprises and clarified the DB2011 calculation of taxable income for corporate income tax purposes. China made paying taxes easier for companies by enhancing the electronic system for filing and paying taxes and adopting new communication channels within its taxpayer service, DB2015 changes applying to both Beijing and Shanghai. In addition, China made paying taxes less costly for companies in Shanghai by reducing the social security contribution rate. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 China 84 PAYING TAXES What are the details? The indicators reported here for China are based on LOCATION OF STANDARDIZED COMPANY the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Shanghai, Beijing chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Shanghai: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Employer paid - Social gross security and housing fund 1 110 35%+7% 49.1 salaries contributions taxable Corporate income tax 1 online filing 59 25% 7.3 profits VAT and Urban maintenance tax 0 paid jointly 0 7% 3.5 BT VAT and Education surcharge 0 paid jointly 0 3% 1.5 BT transactio Stamp duty 1 online filing 0 0.03% 1 ns 80% Real estate tax 1 0 1.2% building 1 value Levies for construction and VAT and 0 paid jointly 0 1% 0.5 maintenance of river projects BT capital Business tax 1 0 5% 0.5 gain Doing Business 2015 China 85 Total tax Notes on Shanghai: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate RMB 6 per Land use tax 1 online filing 0 square land area 0.1 meter 17% value not Value added tax (VAT) 1 online filing 92 0 added included Employee paid - Social gross security and housing fund 0 paid jointly 0 10.5%+7% 0 withheld salaries contributions Totals 7.0 261.0 64.5 Total tax Notes on Beijing: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Employer paid - Social gross security and housing fund 1 110 32%+12% 49.1 salaries contributions taxable Corporate income tax 1 online filing 59 25% 7.3 profits VAT and Urban maintenance tax 0 paid jointly 0 7% 3.5 BT VAT and Education surcharge 0 paid jointly 0 3% 1.5 BT transactio Stamp duty 1 online filing 0 0.03% 1 ns 80% Real estate tax 1 0 1.2% building 0.8 value capital Business tax 1 0 5% 0.5 gain RMB 12 per Land use tax 1 online filing 0 square land area 0.3 meter Employee paid - Social gross security and housing fund 0 paid jointly 0 10.2%+12% 0 withheld salaries contributions 17% value not Value added tax (VAT) 1 online filing 92 0 added included Doing Business 2015 China 86 Total tax Notes on Beijing: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Totals 7.0 261.0 64.6 Source: Doing Business database. Doing Business 2015 China 87 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 China 88 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in China? population-weighted average of the 2 largest business According to data collected by Doing Business, exporting cities. See the chapter on distance to frontier and ease of a standard container of goods requires 8 documents, doing business ranking at the end of this profile for more takes 21.0 days and costs $823.0. Importing the same details. container of goods requires 5 documents, takes 24.0 Globally, China stands at 98 in the ranking of 189 days and costs $800.0 (see the summary of four economies on the ease of trading across borders (figure predefined stages and documents at the end of this 9.1). The rankings for comparator economies and the chapter for details). Most indicator sets refer to a case regional average ranking provide other useful scenario in the largest business city of an economy, information for assessing how easy it is for a business in except for 11 economies for which the data are a China to export and import goods. Figure 9.1 How China and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 China 89 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in China (table 9.1)? based inspections and electronic data interchange Table 9.1 How has China made trading across borders easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform China made trading across borders easier by relaxing trade DB2010 credit restrictions. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 China 90 TRADING ACROSS BORDERS What are the details? The indicators reported here for China are based on a LOCATION OF STANDARDIZED COMPANY set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the indicators Port Name - Beijing: Tianjin port cover). Information on the required documents and the time and cost to complete export and import is Port Name - Shanghai: Shanghai (Yangshan collected from local freight forwarders, shipping lines, Terminal) customs brokers, port officials and banks. City: Shanghai, Beijing The predefined stages, and the associated time and cost, for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Shanghai Beijing Stages to export Time (days) Cost (US$) Time (days) Cost (US$) Customs clearance and inspections 2 80 2 75 Documents preparation 14 305 14 305 Inland transportation and handling 2 95 2 350 Ports and terminal handling 3 140 3 341 Totals 21 620 21 1,071 Shanghai Beijing Stages to import Time (days) Cost (US$) Time (days) Cost (US$) Customs clearance and inspections 4 80 4 75 Documents preparation 15 260 15 260 Inland transportation and handling 2 135 2 350 Ports and terminal handling 3 140 3 341 Totals 24 615 24 1,026 Doing Business 2015 China 91 Documents to export Bill of Lading Commercial Invoice Contract (between exporter and importer) Customs export declaration Foreign exchange (FX) Form Packing List Station receipts Terminal handling receipts Documents to import Bill of lading Commercial Invoice Contract (between exporter and importer) Customs import declaration Packing list Source: Doing Business database. Doing Business 2015 China 92 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 China 93 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial cities. See the chapter on distance to frontier and ease of dispute through the courts in China? According to data doing business ranking at the end of this profile for more collected by Doing Business, contract enforcement takes details. 452.8 days, costs 16.2% of the value of the claim and Globally, China stands at 35 in the ranking of 189 requires 37.0 procedures (see the summary at the end of economies on the ease of enforcing contracts (figure this chapter for details). Most indicator sets refer to a 10.1). The rankings for comparator economies and the case scenario in the largest business city of an economy, regional average ranking provide other useful except for 11 economies for which the data are a benchmarks for assessing the efficiency of contract population-weighted average of the 2 largest business enforcement in China. Figure 10.1 How China and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 China 94 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in China (table 10.1)? Table 10.1 How has China made enforcing contracts easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform China made enforcing contracts easier by amending its civil DB2014 procedure code to streamline and speed up all court proceedings. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 China 95 ENFORCING CONTRACTS What are the details? The indicators reported here for China are based on COURT NAME a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on what the Claim value - Beijing: CNY 76,718 indicators cover). These procedures, and the time and cost of completing them, are identified through Claim value - study of the codes of civil procedure and other court CNY 76,718 Shanghai: regulations, as well as through questionnaires completed by local litigation lawyers (and, in a Beijing District People's quarter of the economies covered by Doing Business, Court name - Beijing: Court by judges as well). Court name - Shanghai District Shanghai: People's Court City: Shanghai, Beijing Table 10.2 Summary of time, cost and procedures for enforcing a contract in China East Asia & Indicator Shanghai Beijing Pacific average Time (days) 406 510 554 Filing and service 21 30 Trial and judgment 195 240 Enforcement of judgment 190 240 Cost (% of claim) 15.1 17.5 48.6 Attorney cost (% of claim) 7.6 10 Court cost (% of claim) 5 5 Enforcement Cost (% of claim) 2.5 2.5 Procedures (number) 37 37 37 Number of procedures (without bonus points) 38 38 Specialized commercial courts -1 -1 Total number of procedures (including bonus points) 37 37 Doing Business 2015 China 96 No. Shanghai Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. Plaintiff files a summons and complaint: Plaintiff files a summons and complaint with the court (orally or * in writing). Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Registration of court case: Registration of court case by the court administration (this can include 2 assigning a reference number to the case). Assignment of court case to a judge: Assignment of court case to a judge (through a random procedure, * automated system, ruling of an administrative judge, court officer, etc). Judicial scrutiny of summons and complaint: Judge examines Plaintiff's summons and complaint for 3 formal requirements as a matter of law or standard practice. Judge admits summons and complaint: Judge admits summons and complaint (after verifying the formal * requirements). Delivery of summons and complaint to person authorized to perform service of process on Defendant: 4 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. Arrangements for physical delivery of summons and complaint: Plaintiff takes the necessary steps to * arrange for physical service of process on Defendant (e.g. instructing a court officer or a private bailiff). Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Guarantees securing attached property: Plaintiff submits guarantees or bonds to secure Defendant 5 against possible damages to attached property. Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 6 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Custody of assets attached prior to judgment: If physical attachment is ordered, Defendant's attached 7 assets are placed in the custody or control of an enforcement officer or private bailiff. Trial and judgment: Doing Business 2015 China 97 No. Shanghai Procedures Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which includes his answer 8 or defense on the merits of the case (see assumption 4). Deadline for Plaintiff to reply to Defendant's defense or answer: Judge sets a deadline for Plaintiff’s 9 submission of a reply to the Defendant's defense or answer. Plaintiff’s written reply to Defendant's answer: Plaintiff responds to Defendant’s answer with a w ritten 10 pleading, which may or may not include witness statements or expert (witness) statements. Adjournments: Court procedure is delayed because one or both parties request and obtain an 11 adjournment to submit written pleadings. Check as ‘yes’ if this commonly happens. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 5-b). Delivery of expert report by court-appointed expert: The independent expert, appointed by the court, * delivers his or her expert report to the court (see assumption 5-b). * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court (see assumption 5-a). Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral 12 hearing or trial (see assumption 5-a). Adjournments: Court proceedings are delayed because one or both parties request and obtain an 13 adjournment to prepare for the oral hearing or trial as a matter of common practice. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 14 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 15 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. 16 Closing of the evidence period: The court makes the formal decision to close the evidence period. Order for submission of final arguments: The judge sets a deadline for the submission of final factual and 17 legal arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 18 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 19 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 20 judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 21 judgment is available at the courthouse. Doing Business 2015 China 98 No. Shanghai Procedures Plaintiff receives a copy of the judgment: Plaintiff receives a copy of the written judgment which is 100% 22 in favor of Plaintiff (see assumption 6). Defendant is formally notified of the judgment: Plaintiff or court formally notifies the Defendant of the 23 judgment. The appeal period starts to run from the day the Defendant is formally notified of the judgment. Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 24 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 25 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff hires a lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by * a lawyer during the enforcement of judgment phase. Plaintiff retains an enforcement agent to enforce the judgment.: Plaintiff retains the services of a court 26 enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff requests an enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). 27 Plaintiff advances enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 28 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a private bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 29 private bailiff requests Defendant to voluntarily comply with the judgment. Identification of Defendant's assets by court official or Defendant for purposes of enforcement: The judge, 30 a court enforcement officer, a private bailiff or the Defendant himself identifies Defendant's movable assets for the purposes of enforcing the judgment through a sale of Defendant’s assets. Contestation of selection of assets identified for sale: A party, Plaintiff or Defendant, which was not 31 involved in the designation of the assets for attachment, contests the selection of assets for enforcement of judgment through a sale. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 32 assets). Valuation or appraisal of attached movable goods: The court or court-appointed valuation expert 33 evaluates the attached goods. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant 34 opposes aspects of the enforcement process before the judge. Doing Business 2015 China 99 No. Shanghai Procedures Call for public auction: Judge calls a public auction by, for example, advertising or publication in the 35 newspapers. 36 Sale through public auction: The Defendant’s movable property is sold at public auction. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 37 Plaintiff had advanced previously. 38 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. No. Beijing Procedures Filing and service: * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2015 China 100 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 China 101 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, China characterize the top-performing economies. How scores 3.0 out of 3 points on the commencement of efficient are insolvency proceedings in China? According proceedings index, 5.0 out of 6 points on the to data collected by Doing Business, resolving insolvency management of debtor’s assets index, 2.5 out of 3 points takes 1.7 years on average and costs 22.0% of the on the reorganization proceedings index, and 1.0 out of debtor’s estate, with the most likely outcome being that 4 points on the creditor participation index. China’s total the company will be sold as piecemeal sale. The average score on the strength of insolvency framework index is recovery rate is 36.0 cents on the dollar. Most indicator 11.5 out of 16. sets refer to a case scenario in the largest business city of Globally, China stands at 53 in the ranking of 189 an economy, except for 11 economies for which the data economies on the ease of resolving insolvency (figure are a population-weighted average of the 2 largest 11.1). The rankings for comparator economies and the business cities. See the chapter on distance to frontier regional average ranking provide other useful and ease of doing business ranking at the end of this benchmarks for assessing the efficiency of insolvency profile for more details. proceedings in China. Figure 11.1 How China and comparator economies rank on the ease of resolving insolvency Doing Business 2015 China 102 Source: Doing Business database. Doing Business 2015 China 103 Figure 11.2 Recovery Rate (0-100) - China Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - China Source: Doing Business database. Doing Business 2015 China 104 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 China LABOR MARKET REGULATION What are the details? The data reported here for China are based on a detailed regulations as well as secondary sources are reviewed to survey of labor market regulation that is completed by ensure accuracy. local lawyers and public officials. Employment laws and Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Shanghai Beijing Difficulty of hiring index Data Data Fixed-term contracts prohibited for permanent tasks? No No No limit - after 10 No limit - after 10 years of work or 2 years of work or 2 renewals of fixed- renewals of fixed- Maximum length of a single fixed-term contract (months) term contracts, term contracts, provisions of article provisions of article 14 of the PRC Labor 14 of the PRC Labor Contract Law apply Contract Law apply Maximum length of fixed-term contracts, including renewals (months) No limit No limit Minimum wage applicable to the worker assumed in the case study 245.39 286.29 (US$/month) Ratio of minimum wage to value added per worker 0.33 0.38 Source: Doing Business database. Doing Business 2015 China 106 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Shanghai Beijing Rigidity of hours index Data Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes Yes increase in workload? Maximum working days per week 6.0 6.0 Premium for night work (% of hourly pay) 39% 39% Premium for work on weekly rest day (% of hourly pay) 100% 100% Major restrictions on night work? No No Major restrictions on weekly holiday? No No Paid annual leave for a worker with 1 year of tenure (in working days) 5.0 5.0 Paid annual leave for a worker with 5 years of tenure (in working days) 5.0 5.0 Paid annual leave for a worker with 10 years of tenure (in working 10.0 10.0 days) Paid annual leave (average for workers with 1, 5 and 10 years of tenure, 6.7 6.7 in working days) Source: Doing Business database. Doing Business 2015 China 107 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Shanghai Beijing Difficulty of redundancy index Data Data Maximum length of probationary period (months) 6.0 6.0 Dismissal due to redundancy allowed by law? Yes Yes Third-party notification if 1 worker is dismissed? Yes Yes Third-party approval if 1 worker is dismissed? No No Third-party notification if 9 workers are dismissed? Yes Yes Third-party approval if 9 workers are dismissed? No No Retraining or reassignment obligation before redundancy? Yes Yes Priority rules for redundancies? Yes Yes Priority rules for reemployment? Yes Yes Source: Doing Business database. Doing Business 2015 China 108 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Shanghai Beijing Redundancy cost indicator (in salary weeks) Data Data Notice period for redundancy dismissal for a worker with 1 year of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 5 years of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 10 years of 4.3 4.3 tenure Notice period for redundancy dismissal (average for workers with 1, 5 4.3 4.3 and 10 years of tenure) Severance pay for redundancy dismissal for a worker with 1 year of 4.3 4.3 tenure Severance pay for redundancy dismissal for a worker with 5 years of 21.7 21.7 tenure Severance pay for redundancy dismissal for a worker with 10 years of 43.3 43.3 tenure Severance pay for redundancy dismissal (average for workers with 1, 5 23.1 23.1 and 10 years of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of unemployment protection schemes as well as data on whether employers are legally required to provide health insurance for employees with permanent contracts. Doing Business also assesses the mechanisms available to resolve labor disputes. More specifically, it collects data on what courts would be competent to hear labor disputes and whether the competent court is specialized in resolving labor disputes. Doing Business 2015 China 109 Shanghai Beijing Social protection schemes and benefits & Labor disputes indicator Data Data Availability of unemployment protection scheme? Yes Yes Health insurance existing for permanent employees? Yes Yes Availability of courts or court sections specializing in labor disputes? Yes Yes Source: Doing Business database. Doing Business 2015 China 110 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components —yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 China 111 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 China 112 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 China 113 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 China 114