FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE China’s Doing Business Success: Drivers of Reforms and Opportunities for the Future © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE TABLE OF CONTENTS ACKNOWLEDGMENTS III ABSTRACT V INTRODUCTION TO DOING BUSINESS 1 What is Doing Business 1 Why Doing Business Matters 3 CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE 5 China’s Doing Business Performance During 2005-2020 5 China’s Business Regulatory Reforms During 2018-2020 7 The Economic Impact of Business Environment Reforms 14 DRIVERS OF BUSINESS REGULATORY REFORMS IN CHINA 17 High-level Leadership and Ownership of the Reform Agenda 17 Local Policy Experimentation 18 Strong Enforcement of the Reform Agenda and Accountability for Results 18 Robust Private Sector Participation and Communication 23 Intensive Use of Digital Technologies and E-Government Services 24 International Knowledge Sharing 25 CONCLUSIONS AND POLICY RECOMMENDATIONS 27 ENDNOTES 31 REFERENCES 35 LIST OF BOXES Box 1: The “Fang Guan Fu” Reform Initiatives 8 Box 2: State Council’s “Decree on Optimizing the Business Environment”: Key Reform Principles 9 Box 3: Reforms to Improve the Business Environment in Beijing During 2018-2019 10 Box 4: Reforms to Improve Business Environment in Shanghai During 2018-2019 11 Box 5: Reforms on Starting a Business, Dealing with Construction Permits and Getting Electricity Recorded by Doing Business During 2017-2019 13 Box 6: The Multi-level Coordination Mechanism in Beijing to Put Forward the Reform Agenda 22 PROMOTING INNOVATION IN CHINA: LESSONS FROM INTERNATIONAL GOOD PRACTICE I LIST OF FIGURES Figure 1: What is Measured by Doing Business? 1 Figure 2: China’s Ease of Doing Business Rankings, 2006-2020 5 Figure 3: China’s Improvements in the Ease of Doing Business Score Since Doing Business 2005 6 Figure 4: China’s Improvements in Ease of Doing Business Score, Doing Business 2018— Doing Business 2020 6 Figure 5: China’s Improvements in the Global Doing Business Ranking, Doing Business 2018— Doing Business 2020 7 Figure 6: China Made Dealing with Construction Permits Easier in 2017-2019 13 Figure 7: Government Effectiveness: China, Upper Middle Income and OECD High Income Countries, 2008-2018 19 Figure 8: The National-Level Coordination Mechanism for Improving Business Environment in China 21 LIST OF TABLES Table 1: What does Doing Business Measure? 12 Areas of Business Regulation 2 Table 2: Key Reform Recommendations for Selected Doing Business Areas in China 28 COMPETITIVENESS FINANCE, FINANCE, & INNOVATION COMPETITIVENESS & INNOVATION INSIGHT | FIRMS, INSIGHT | INVESTMENT CLIMATE ENTREPRENEURSHIP, & INNOVATION ACKNOWLEDGMENTS T his paper was written by Marcin Piatkowski, Senior Economist, Sylvia Solf, Senior Private Sector Specialist, and Wenting Wei, World Bank Consultant. The authors appreciate valuable comments and written under the overall supervision of Martin suggestions from Erica Bosio, Maksym Iavorskyi, Raiser, Country Director for China and Mongolia Debra Ladner, Sebastian Eckardt, Luan Zhao and and Director for Korea, and Irina Astrakhan, Andreja Marusic. The authors are also grateful for Practice Manager, East Asia and Pacific, Finance, the excellent support of Shang Yu. The paper was Competitiveness and Innovation Global Practice. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE III SECTION TITLE IV FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE ABSTRACT C hina has witnessed an unprecedented improvement in its business environment as measured by Doing Business over the past few years when—after 15 years of relatively subdued performance in Doing Business—it advanced by almost 50 places from 78th position in Doing Business 2018 to the 31st position in Doing Business 2020 and was included among the top 10 global reformers for two years in a row. The objective of this working paper is to (i) opportunities for business environment reforms; and document China’s business environment reform (iv) share lessons learned from China’s experience experience over the past few years, (ii) analyze the with other economies that also aspire to improve reform measures and the institutional arrangements the business environment. that enabled this success, (iii) identify the remaining PROMOTING INNOVATION IN CHINA: LESSONS FROM INTERNATIONAL GOOD PRACTICE V SECTION TITLE VI FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE INTRODUCTION TO DOING BUSINESS What is Doing Business T he Doing Business project of the World Bank measures how easy it is to do business for primarily domestic small and medium size enterprises (SMEs) across 190 economies around the world through ten quantitative and qualitative indicators, which measure the cost of doing business and the quality of the regulations and institutions that impact the business environment. The indicators focus on regulations and their Doing Business has been evolving over the years. implementation as applied to SMEs throughout their The first Doing Business report was launched in 2003 life cycle, from starting a business to resolving an and covered 5 indicator sets and 133 economies. insolvency (Figure 1). Doing Business gathers and The latest Doing Business is the 2020 report, which analyzes comprehensive quantitative data through covered 12 indicator sets and 190 economies. Ten standardized case studies to compare business of these areas—starting a business, dealing with regulation environments across economies and construction permits, getting electricity, registering over time, with the goal of encouraging economies property, getting credit, protecting minority to compete towards more effective regulations. investors, paying taxes, trading across borders, This means encouraging regulation that is efficient, enforcing contracts, and resolving insolvency—are transparent, easy to implement, and intended to included in the ease of doing business score and ease promote private sector development, employment of doing business ranking (Table 1). Doing Business and economic growth. also measures regulation of employing workers and contracting with the government but these do not currently factor into the ranking.1 Figure 1: What is Measured by Doing Business? Opening a Getting a Accessing Dealing with Operating in a Business Location Finance Day-to-day Secure Business Operations Environment Starting a Employing Dealing with Getting Registering Getting Protecting Paying Trading Contacting Enforcing Resolving Business Workers Construction Electricity Property Credit Minority Taxes Across with the Contracts Insolvency Permits Investors Borders Government (coming soon) Note: Employing workers is not included in the ranking. Contracting with the government may be included in the future. Source: World Bank 2020. PROMOTING INNOVATION IN CHINA: LESSONS FROM INTERNATIONAL GOOD PRACTICE 1 Table 1: What does Doing Business Measure? 12 Areas of Business Regulation Indicator Set What is Measured Starting a business Procedures, time, cost, and paid-in minimum capital to start a limited liability company for men and women Dealing with Procedures, time, and cost to complete all formalities to build a warehouse and the construction permits quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time, and cost to get connected to the electrical grid; the reliability of the electricity supply; and the transparency of tariffs Registering property Procedures, time, and cost to transfer a property and the quality of the land administration system for mene and women Getting credit Movable collateral laws and caredit information systems Protecting minority Minority shareholders’ rights in related-party transactions and in corporate governance investors Paying taxes Payments, time, and total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading acaross Time and cost to export the product of comparative advantage and to import auto parts borders Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes for men and women Resolving insolvency Time, cost, outcome, and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation Contracting with the Procedures and time to participate in and win a works contract through public procurement government and the public procurement regulatory framework Note: The employing workers and contracting with the government indicator sets are not part of the ease of doing business ranking in Doing Business 2020. Source: World Bank 2020. As with any methodology, Doing Business has and understand the regulations, and as a result limitations. First, to ensure comparability of data may choose not to comply with them. Third, across economies, Doing Business indicators are Doing Business does not focus on the informal developed using standardized case scenarios with sector, although it measures one set of factors that specific assumptions, which come at the expense help explain the occurrence of informality, and it of country-specific circumstances. Second, Doing provides policy makers with insights into potential Business indicators assume entrepreneurs have full areas of regulatory reform. Lastly, Doing Business knowledge of the existing regulations and seek focuses on domestic firms and primarily SMEs to comply with them. In practice, entrepreneurs only and—while often closely correlated with other may lose considerable time trying to ascertain business environment indicators—may not always INTRODUCTION TO DOING BUSINESS 2 be a good predictor of the investment climate between 2003 and 2020 around the world. Haidar for large companies, including Foreign Direct (2012) estimates that, on average, each business Investment (FDI). regulatory reform increases GDP growth by 0.15%. Hanush (2012) shows that improvements in the Doing Business also does not measure many factors Doing Business index can, on average, lead to a 5.2 that are critical to economies’ competitiveness and percent increase in GDP per capita growth over a 10- their economic performance, such as the size of the year period, with the biggest impact resulting from market, macroeconomic stability, quality of human reforms in getting credit, enforcing contracts and capital, sophistication of the financial system, level starting a business. Djankov, McLiesh, and Ramalho of corruption or the strength of market competition (2006) argue, based on an analysis of business and existence of a level-playing field. The results regulations in 135 economies, that economies with a of Doing Business should thus be interpreted with better regulatory framework grow at a faster pace and caution and treated as just one of the numerous that moving from the bottom quarter of the quality factors that affect a country’s economic potential. of business regulations worldwide to the top quarter would translate into a 2.3 percentage point increase Why Doing Business Matters in annual GDP growth. Eifert (2009) analyzes Doing There is substantive economic literature that Businesss reform data for 2003-2007 and finds documents the relationship between the quality of that “relatively poor and relatively well-governed the business environment and a country’s economic economies grow about 0.4 and 0.2 percentage points performance, as reflected in changes in, for instance, faster in the year immediately following one or productivity, employment, startup rates for new more reforms, respectively”, while investment rates businesses, and cost of credit. For example, Alesina increase by about 0.6 percentage points a year after and others (2005) provide evidence that regulatory the implementation of reforms. Finally, Jayasuriya reforms, particularly those focused on liberalizing (2001) argues that Doing Business reforms help market entry, promote private sector investment. attract foreign direct investment. Corcoran and Klapper, Laeven and Rajan (2006) show that high Gillanders (2015) find a strong correlation between market entry barriers discourage entrepreneurship. foreign investment and the ease of doing business Fernandes, Ferreira, and Winters (2018) argue that ranking for the period 2004–09. streamlined business registration in Portugal has As to the impact of reforms in specific Doing enhanced competition and helped improve firm Business topics, Djankov et al. (2002) show that performance. Djankov, Georgieva, and Ramalho more complicated business startup leads to higher (2018) find, based on data for 189 economies for the corruption and suboptimal quality of public goods, period 2005–13, that business-friendly regulation which undermines economic growth. Gathani, is correlated with a lower poverty head count at the Santini and Stoelinga (2013) find that the introduction economy level, and this association is significant of one-stop shops to streamline business start-up in using Doing Business data on getting credit and Rwanda led to a 188 percent increase in business enforcing contracts. Doing Business 2020 (World registrations. Testing the benefits of eased start-up Bank 2020) highlights the importance of various regulation in Vietnam, Demenet, Razafindrakoto, measures of the quality of business environment for and Roubaud (2016) find that following the reforms economic growth and development. the value added to firms increased on average There is also robust empirical evidence for the by 20 percent. Lastly, Klapper and Love (2010) positive economic impact of more than 3,500 argue that high fees and abundant red tape during Doing Business reforms that were implemented business registration reduce the number of new firm registrations.2 CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 3 FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE China’s Doing Business Performance During 2005-2020 S ince 2005, China has been a consistent, although a relatively subdued Doing Business performer. It was only in 2018 and 2019 that China’s Doing Business reforms accelerated, which helped China leap by 47 positions on the ease of doing business ranking, from 78th place in Doing Business 2018 to 31st place in Doing Business 2020 (Figure 2). China was also recognized as one of the top 10 most improved economies worldwide for the ease of doing business for two years in a row. The recent acceleration in business reforms has also Business indicators improved (except for Getting helped China become the top reformer among large Credit and Registering Property) (Figure 4). economies since 2005 (Figure 3). The far-reaching reforms have placed China at the China has improved across almost all Doing forefront of reform in several areas (Figure 5). In Business indicators over the last decade, but the getting electricity, for instance, China is now placed progress has been particularly impressive during among the global leaders, ranked 12th worldwide. It Doing Business 2018-2020, when most Doing has also maintained its leading position in contract enforcement, ranked 5th in the world. Figure 2: China’s Ease of Doing Business Rankings, 2006-2020 120 108 100 93 96 89 91 91 90 86 87 84 83 80 78 78 60 46 40 31 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Note: The ease of doing business ranking ranges from 1 to 190, with the ranking of economies determined by sorting the aggregate ease of doing business scores. New Zealand ranked 1st and Somalia ranked 190th in Doing Business 2020. Please note that the methodology of the ranking has evolved since Doing Business 2004, including a methodological upgrade in Doing Business 2016, which has affected the relative position of economies. The rankings are thus not strictly comparable over time. Source: Authors’ own based on Doing Business reports, 2006-2020. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 5 Figure 3: China’s Improvements in the Ease of Doing Business Score Since Doing Business 2005 40 35 30 25 20 15 10 5 - China India Russia France Italy Brazil Japan United Germany Canada (5) Kingdom United States DB 2019-2020 DB 2015-2018 DB 2010-2014 DB 2005-2009 Note: The measure is normalized to range from 0 to 100, with 100 representing the best regulatory performance. Because of changes over the years in methodology and in the economies and indicators included, the improvements are measured year on year using pairs of consecutive years with comparable data. Source: Authors’ own based on the Doing Business database, 2020. Figure 4: China’s Improvements in Ease of Doing Business Score, Doing Business 2018—Doing Business 2020 120 100 80 94 94 92 95 85 87 83 77 76 81 81 78 79 81 72 60 65 69 68 70 70 60 60 60 60 63 62 56 56 40 47 48 20 0 ine ng Pe u cti ith tric n g er g ed g es orit g xe g Bo cro i ng rac g en n g o p rin n t ci n Cr tti n Inv Min cti n Ta yi n tr w us tarti olv lvi ss rm o n ity ty it to y s rde ss ts cy ec tti A ad Pr i ste Co fo r ns ing Ins e s o Pa El Ge Ge e its rs rs Tr aB S ot En g Co a l Pr R Re De DB 2018 DB 2019 DB 2020 Note: The score for each indicator ranges from 1 to 100 with 100 representing the global good practice frontier in a given year. DB: Doing Business. Source: Authors’ own based on the Doing Business database, 2020. CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE 6 Figure 5: China’s Improvements in the Global Doing Business Ranking, Doing Business 2018—Doing Business 2020 200 180 160 172 140 120 130 121 119 100 114 98 105 97 80 93 80 60 68 73 64 65 40 56 56 61 51 41 20 28 27 33 27 28 28 14 12 5 6 5 0 ine ng Pe u cti ith tric n g ed g es orit g xe g de g er g rac g en n g or di n o p rin n t ci n Cr tti n Inv Min cti n Ta yi n tr w us tarti olv lvi ss rm o n ity it rs ty to y s ts cy ec tti Pr i ste Co n fo r ns ing Ins e s o Pa El Ge Ge s B Tra e its rs aB S ot g Co a l E Pr R Re De s ro Ac DB 2018 DB 2019 DB 2020 Note: The ranking is from 1 to 190. DB: Doing Business. Source: Authors’ own based on the Doing Business database, 2020. China’s Business Regulatory to be an important policy instrument to support Reforms During 2018-2020 entrepreneurship, promote corporate investments, guide expectations of the private sector and signal China’s commitment to a more market-oriented Momentum of Accelerating the Business economy and further opening of its internal market Reform Agenda to global trading partners (Zhang and Ma, 2019). In response to a slowing economy and a declining In 2015, the government launched a national growth in productivity (World Bank Group and reform initiative (the “Fang Guan Fu” reforms) DRC, 2019), China’s top leadership has prioritized to delegate power, streamline administration and improvement in the business environment as one of optimize government services, which laid down the key pillars of its strategy to support economic the foundations of later reforms, including those competitiveness and strengthen the supply-side captured by Doing Business (see Box 1 for details). of the economy. China’s Premier Li Keqiang has reiterated on many occasions that “business Following the start of a close collaboration with environment is productivity”. The Chinese the World Bank, the business environment reform authorities have started to consider a better business agenda was reinvigorated in 2017. In contrast to environment as one of the key factors required to previous concerns as to whether the Doing Business push China’s economic development towards ranking correctly reflected the quality of China’s a sustainable and high-quality development business environment, this time the Chinese model and now—in the context of the Covid-19 authorities decided to embrace the Doing Business pandemic—to support economic recovery. The ranking as a useful monitoring and motivating government perceives a better business environment mechanism to improve the business environment, CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 7 Box 1: The “Fang Guan Fu” Reform Initiatives The “Fang Guan Fu” reform initiatives, as key measures to change the role of the government and improve the business environment and revitalize market activities, focus on redefining the relationship between the government and the market through deregulation, streamlined administrative procedures and improved public services. Deregulation includes reducing regulation and micro-management by the government, and letting the market play the dominant role in economic activities. Streamlined administrative procedures imply simpler and fewer administrative approval procedures, as well as the transformation towards more risk- based ex-post supervision by the government rather than intensive administrative approval at the early stage of business activities. Improved public services include those that better respond to the real needs of businesses and the public, and more efficient services thanks to increased emphasis upon the internet and digital technologies. The “Fang Guan Fu” reform initiatives emphasize the combination of reforms in these three aspects to remove institutional barriers to a better business environment and sustainable economic development. Source: Authors’ own based on the website of China’s State Council, http://www.gov.cn/xinwen/2019-07/31/content_5417514.htm spur economic growth and enhance China’s on firms in China by replacing the business tax international image. The Doing Business ranking with a value-added tax and reduced the VAT’s rate has also been adopted to evaluate the effects and from 17%-11% to 16%-10% in 2018 and further, progress of the “Fang Guan Fu” reforms (Song and to 13%-9% in 2019. In January 2018, the State Tax He, 2018). Administration introduced preferential treatment on the corporate income tax rate for small and thin- China’s Premier Li Keqiang started to announce profit enterprises (STEs). STEs meeting certain the Doing Business results during the annual “Fang criteria could cut their annual taxable income by half Guan Fu” conference. The decision to embrace the and be subject to a corporate income tax rate of 20% Doing Business indicators helped galvanize reforms, (State Tax Administration of China, 2019). coordinated by the Ministry of Finance at the national level and in Beijing and Shanghai, the two cities In 2016, the General Administration of Customs of covered by Doing Business. During the period 2018- China, along with 24 other government agencies, 2020, there have been an unprecedented number of began setting up a standard “single-window” for reforms at the national level and in the two cities to trade and over the next two years developed its key improve the business environment, which are in line functional modules. The single-window for trade with both the areas measured by Doing Business and is currently being implemented across the whole the national “Fang Guan Fu” reform initiative. country and, according to the government, has connected the data of 25 relevant agencies, with Business Regulatory Reforms at the 16 functional modules covering various ports and National Level around 600 types of cross-border business.4 During 2018-2020, China implemented significant In January 2020, the new “Decree on Optimizing the business reforms at the national level. For instance, Business Environment” released by China’s State in March 2019, the Supreme Court of the PRC Council became effective. The Decree specifies the issued judicial interpretations of the 2006 Enterprise principles and directions for fostering a stable, fair, Bankruptcy Act that enhanced the overall insolvency transparent and predictable business environment framework by further clarifying creditors’ rights, and detailed efforts on cutting red tape, streamlining streamlining insolvency procedures and increasing administrative approval, and improving supervision transparency.3 Other reforms reduced the tax burden and administrative law enforcement.5 Key principles CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE 8 stated by the Decree include reducing government Business Regulatory Reforms in Beijing intervention of market activities, promoting equal and Shanghai treatment for all types of market entities (that is, the equal treatment of domestic firms versus foreign Beijing implemented intensive business regulatory investment firms and private firms versus SOEs) reforms in 2018-2020, which were focused on and strengthening protection for the legal rights of streamlining administrative procedures and reducing market entities including intellectual property rights transaction costs and time for companies and through establishment of penalty and compensation individuals. In 2018, Beijing released a Three-Year mechanisms. The Decree also included specific Action Plan to Further Improve Business Environment reform guidance on the 11 Doing Business topics and in Beijing (2018-2020) which outlined the city’s a set of good reform principles based on international business reform agenda and listed 298 reform tasks good practices (The State Council of China, 2019) with a phased implementation roadmap.8 Following —see Box 2 for more details. the Action Plan, Beijing also released three Business Box 2: The State Council’s “Decree on Optimizing the Business Environment”: Key Reform Principles Starting A Business: There should be standard and consistent guidelines on business registration by using uniform data standards, service platforms and social credit codes.6 The administrative procedures for business licensing should be streamlined across the country by removing administrative approvals, converting approvals into record keeping and applying the “notification and commitment-based approval procedures”. Business licensing administration shall be categorized to facilitate smooth operation of firms. Except for some particular industries, business licensing should not be a pre-requirement for business registration. The number of procedures required to set up and operate a business should be reduced. Each jurisdiction shall set and publicize the processing time which should be fewer than 5 business days across the whole country by the end of 2019.7 Property Registration: Cross-agency coordination shall be strengthened to enable property registration, transaction and taxation to be applied and processed through a single window to reduce processing time and costs. Each jurisdiction shall set and publicize the processing time within the time frame as set by the national regulation: the current Provisional Decree on Property Registration requires all property registration to be completed within 30 business days. Getting Electricity: The public utilities including power supply companies shall make information on service quality and pricing standards publicly available. They shall provide safe, convenient, stable and reasonably priced utility services. Unreasonable charges are not allowed in any form. Each jurisdiction shall streamline the procedures to get power connection and set and publicize the time needed to get connected. The overall time should be reduced to fewer than 45 business days across the whole country by the end of 2019. Paying Taxes: The subnational tax authorities shall streamline the taxation procedures and document requirements, reduce the tax filing frequency, reduce and publicize the tax processing time, promote the use of electronic invoices and gradually achieve e-services for all tax issues. Source: Authors’ own based on the State Council’s “Decree on Optimizing the Business Environment”. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 9 Environment Reform Schemes (BERS) with more In 2020, Beijing released a “Decree on Optimizing the detailed reform tasks to be completed each year. Business Environment in Beijing”, made effective on Beijing launched the first BERS in 2018 to cover April 28, 2020, which institutionalized the business reform tasks in line with the ten areas measured reform agenda in the city based on the State Council by Doing Business. The list was twice expanded in Decree. By benchmarking international good practices, 2019 to include additional areas of reform, including the decree provides solutions for business reform protection of intellectual property rights, market areas including those measured by Doing Business. supervision, international talent attraction, access It focused on: (i) improving administrative efficiency to finance by small and micro enterprises (SMEs), through “notification and commitment based approval innovation support and setting up of corporate procedures”, a credit-based supervision system, and individual credit systems. The three BERS standardized administrative services and intensive specified around 400 reform tasks and policies in use of information technologies such as block chain total.9 Major reforms included streamlining the technologies; (ii) creating a level playing field for all approval procedures for business establishment and market entities; (iii) strengthening the coordination operation, integrating the approval procedures by mechanism for business reform agenda by widely different government agencies and setting up “one- involving stakeholders and establishing periodic stop shops” to simplify the application and approval reporting system on business reform progress; and (iv) process, establishing a municipal level e-government implementing a joint business reform agenda between service platform to promote online application and Beijing and its neighboring Tianjin Municipality and enhancing data sharing among agencies through the Hebei Province. Box 3 provides further details on the use of cloud technologies. business regulatory reforms in Beijing. Box 3: Reforms to Improve the Business Environment in Beijing During 2018-201910 Since 2018, Beijing has re-engineered procedures to make it easier and cheaper to do business in the city and become more oriented towards the needs of the business community and the broader public. By the end of 2019, 54 municipal government agencies had set up windows in one centralized municipal government service center, and, according to the government, 70 percent of the administrative approvals can be applied for and processed through a single window. In 2019, 95 percent of new business set-up procedures were completed through the e-window online service platform. Beijing has also pioneered reforms in other areas. For instance, in August 2019, to improve SME access to finance, Beijing set up the country’s first SME Credit Renewal Center where 15 banks are located to provide on-site loan and renewal services to SMEs. The center has made it easier and more transparent for SMEs to get credit by applying standard application procedures among the banks in the center and streamlining the approval process. The applicants can be informed of the credit decisions within ten business days after the application. Beijing was also the first city in the country to pilot a unified registration system for movable assets. Based on the World Bank Group’s advice, it moved the role of registering pledge of production equipment, raw materials, semi-finished products and products from the original responsible agency, the Municipal Administration of Market Regulation, and combined it with the Credit Reference Center of the People’s Bank of China into a unified registration system. The movable collateral registration system officially entered into operation in April 2019, which—according to the authorities—has largely reduced the collateral registration procedures and costs. This practice was also included in the State Council 2019 list of reforms to be replicated across the country. Source: Authors’ own based on the Beijing Municipal Government, http://www.gov.cn/xinwen/2019-12/12/content_5460480.htm CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE 10 Shanghai has also accelerated its business Fu” reform initiative, including opening up market environment reforms during 2018-2020. Following access in finance, modern services and advanced a city-wide meeting to mobilize the business reform manufacturing industries, strengthening protection agenda at the end of 2017, business reform became the of intellectual property rights, providing tailor-made top priority for Shanghai authorities. Leveraging the services to the private sector and increasing support World Bank Group’s technical assistance and policy to SMEs.12 recommendations, in 2018 Shanghai launched its first In April 2020, Shanghai adopted a “Decree on BERS, which put in place more than 40 reform tasks Optimizing the Business Environment in Shanghai”, and policies and 20 online administrative processing which builds on the national decree and emphasizes systems. The city launched two more BERS in the following key reform principles: (i) the business 2019 and early 2020, covering in total 188 reform environment reform agenda in Shanghai will be tasks under the local jurisdiction and 58 reform centered around the real needs of the business policies.11 The latest BERS version “3.0” aims to (i) community and the public and will be evaluated introduce “a single window portal” for all approval by their perceptions; (ii) Shanghai will encourage procedures through institutional restructuring and local reform policy experimentation and piloting wide use of digital technologies to allow for cross- in areas including Shanghai Free Trade Zone and agency data sharing and joint approval; (ii) improve Zhangjiang National Innovation Demonstration Shanghai’s performance in Doing Business and the Zone; (iii) Shanghai will strengthen cooperation domestic business environment evaluation carried with other provinces and cities in the Yangtze River out by the central government; and (iii) include Delta on reforms for a better business environment other regulatory reforms as reflected by the business with consistent regulations on market access community to boost market vitality and support and supervision; and (iv) Shanghai will continue economic growth (Shanghai Municipal Government, improving administrative efficiency. Box 4 shows 2020). In addition to Doing Business reforms, the more detailed examples of business reforms in reform agenda in Shanghai also included major Shanghai to streamline administrative procedures. reform tasks underlying the national “Fang Guan Box 4: Reforms to Improve the Business Environment in Shanghai During 2018-201913 During 2018-2019, Shanghai authorities have taken a number of measures to streamline administrative procedures and cut red tape. For instance, in 2019, the Shanghai government introduced simplified “notification and commitment-based approval procedures” to replace the traditional complicated and lengthy approval process14, which according to the government, has become widely used in business licensing and construction permitting. Shanghai was among the first cities in China to pilot simplified approval procedures and the first city to institutionalize the new system through the release of an official regulation in 2018.15 In 2019, Shanghai carried out pilot reforms in the city’s Pudong New Development Zone to consolidate multiple licenses for business start-up into one “industrial license that reduces the number of procedures and the time needed for business registration. Previously, it was necessary to obtain five licenses from five separate public agencies to, for example, open a convenience store, but with the present reform in place, only one “industrial integrated license” is required. According to the government, so far such reforms have been implemented in ten pilot business activities, including convenience stores, restaurants, hotels, and fitness centers. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 11 Box 4: Reforms to Improve the Business Environment in Shanghai During 2018-2019 (continued) In 2018, Shanghai also set up a “single window portal” for administrative approvals across all agencies and districts in the city. Prior to this, administrative applications needed to be made separately at the respective agency within each district of the city. With the “single window portal”, all administrative approvals can be applied for through the new portal. According to the government, the new portal has connected the business management systems of 49 agencies supported by the city’s Big Data Center. The portal lists guidance for applicants based on more than 110 specific business types such as “opening a restaurant” and “opening a supermarket”. It includes specific guidance on topics including the Doing Business indicators as well as others such as investment project online approval, guide for foreigners in Shanghai and full-range business service cloud, which provides detailed information on all types of business services.16 This portal now covers more than 2,000 administrative service items. It is maintained by the Shanghai Big Data Center, which was set up in 2018 to support digitalized public services in the city. Source: Authors’ own based on public sources and information from the Shanghai Development and Reform Commission (DRC), 2020. Private Sector Perception of Improved state owned and foreign investment companies Business Environment in 25 provinces/cities/autonomous regions in China, around 93 percent of the firms perceived an Beyond official reports, there is additional evidence improvement in the business environment in 2016- that the business community in China has benefited 2018, and 87 percent of them were “highly satisfied” from the recent business reforms. According to the or “satisfied” with the business environment, an business environment evaluation survey carried increase of 16 percentage points relative to the results out by the “All-China Federation of Industry and in 2016; foreign investment companies gave the best Commerce”, among more than 41,000 privately ratings (4.19 out of a total of 5) among all types of owned firms of different sizes and industries in firms; and of all the industries, the high tech firms 200 cities in China, the private sector perception gave the highest ratings (4.22 out of 5).19 of business environment in China as a whole has been improving. Beijing and Shanghai, along with Reforms Captured by Doing Business Shenzhen, Guangzhou and several other cities, are the top performing cities in terms of firm satisfaction with The strong reform momentum in China has also been the business environment; administrative efficiency recognized in Doing Business. For reforms to be is rated as the area where firms have felt the biggest captured by the Doing Business report, they have to be improvement, as compared to their perception of the relevant to the areas measured by the Doing Business legal institutions, the innovation environment and indicators, fully implemented and enforced by the market conditions.17 Another survey carried out by public sector, and adopted by the business community the State Council in 2019 among 6,000 firms across and the practitioners. Doing Business 2019 recorded the country indicated that around 90 percent of them seven areas of reforms for China, while Doing Business were highly satisfied or satisfied with the business 2020 captured reforms in eight areas, the biggest environment, and more than 70 percent of them improvements that China has ever experienced since benefited from the tax cut.18 In the 2018 survey by the start of the Doing Business project in 2003 (before the “Academy of China Council for the Promotion 2018, on average only 2-3 reforms were captured by of International Trade” of 4,000 privately owned, Doing Business each year).20 Over the last two years, CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE 12 Doing Business has recorded continuous reforms in helped substantially to improve China’s performance starting a business, dealing with construction permits, on these indicators (Figure 5). Box 5 provides more getting electricity, protecting minority investors, details on the reforms in starting a business, dealing paying taxes and trading across borders. The reforms with construction permits and getting electricity. Box 5: Reforms in Starting a Business, Dealing with Construction Permits and Getting Electricity Recorded by Doing Business During 2017-2019 Starting a Business: during 2017-18, China made it easier to start a business by launching online company registration and simplifying social security registrations in both Beijing and Shanghai. In 2018, the one-stop shop for business start-up in Beijing started to provide a company seal together with company registration, free of charge. Previously the seal was requested through the one-stop shop and obtained at the seal-makers. Now the process is fully integrated into the Beijing one-stop shop. Starting a business in Beijing became easier and more streamlined, as the number of interactions required to register a company was further decreased. Dealing with Construction Permits: during 2017-18, Beijing and Shanghai streamlined the process of obtaining the building permit, receiving the certificate of completion and registering new buildings with the real estate registry. They also improved the building quality control by introducing stricter qualification requirements for professionals in the construction industry and improving public access to information. In 2018-19, both cities made additional steps to make obtaining building permits easier, by simplifying the requirements for low-risk construction projects and by reducing the time to get water and drainage connections. China also made construction safer by imposing stricter qualification requirements for professionals in charge of technical inspections and verifying architectural plans as well as differentiated building quality supervision schemes. Figure 6: China Made Dealing with Construction Permits Easier in 2017-2019 Increased Safety Stricter Qualifications for Simplified Approval Faster Service to Obtain Water & Professionals Doing for Low-risk Projects Drainage Connections Inspections & Plan Approvals 169.5 15 136.5 125.5 11 93 Building Quality Control Index Total Time to Obtain Building Total Time to Obtain Building (0-15) Permits in Shanghai (Days) Permits in Beijing (Days) 2017/18 2018/19 CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 13 Box 5: Reforms on Starting a Business, Dealing with Construction Permits and Getting Electricity Recorded by Doing Business During 2017-2019 (continued) Getting Electricity: China made getting electricity easier in Beijing and Shanghai by expanding network capacity so that all connections of power loads of 160kV or less are now made directly to the low voltage network, for which the connection process is carried out entirely free of charge by the utility. Beijing and Shanghai also rolled out a new mobile application for customers that reduced the time to obtain an electricity connection. In 2019, Beijing and Shanghai simplified power connection requests so that customers can now apply for electricity and sign a supply contract online. Both cities also made electricity tariffs more transparent by announcing tariff changes one billing cycle in advance of their implementation. Source: Authors’ own based on Doing Business 2019 and Doing Business 2020. Thanks to the ongoing reforms, Beijing and Shanghai innovative: during 2018-2019, more than 150,000 have become global top performers in selected Doing new tech companies were registered in the city, or Business areas. For instance, Beijing is one of only a more than 200 per day.23 few cities in the world where the process of starting Shanghai has also seen an increase in entrepreneurship: a business is almost free. It takes 3 procedures and as of the end of 2019, there were in total around 8 days to complete a business start-up in Beijing, 2.2 million firms registered in Shanghai, around whereas it takes on average 6.5 procedures and 367,620 firms were set up in the year, growing by 8% 25.6 days in the East Asia and Pacific (EAP) region annually.24 There are currently more than 2.5 million and 4.9 procedures and 9.2 days in OECD high- market entities in Shanghai, one for every ten people income countries. In dealing with construction in Shanghai.25 permits, it now takes only 93 days to complete the building permitting procedures in Beijing, and both Shanghai and Beijing received a score of 15 out of The Economic Impact of Business 15 in the quality index of the indicator, compared Environment Reforms to the region’s average of 132 days and 9 out of 15 A less business-friendly environment, as captured points, respectively. Finally, China now ranks 12th by Doing Business before the reform acceleration in globally in getting electricity and became one of the 2018, does not seem to have prevented China’s GDP global best performers, with only 2 steps to get a per capita from growing at a fast pace, exceeding commercial electricity connection. It now takes 32 8 percent per year during 2005-2018, supported by days to obtain a power connection in China, half the high public investment, a large labor supply and EAP average of 63 days. growing exports. However, China can no longer rely Business environment reforms in Beijing on these engines of growth, as marginal returns to and Shanghai are likely to have promoted public investment have diminished, growth in labor entrepreneurship and enhance competitiveness. supply has fallen (in line with population aging) At the end of 2019, there were in total around and growth in exports has stagnated. As China’s 1.65 million of firms registered in Beijing; around economy matures and continues to move from upper- 185,800 new firms were registered in the year, almost middle income to high-income status, the regulatory 90 percent of which were privately owned domestic constraints on the business environment are likely to firms.21 As of the end of 2019, Beijing also had 83 become more binding. This is particularly the case unicorn companies.22 Beijing is also becoming more in the leading cities in China, such as Beijing and CHINA’S BUSINESS REGULATORY REFORM EXPERIENCE 14 Shanghai, which increasingly compete with the US$425 million in operating costs of enterprises, top performing global cities such as Tokyo, Seoul, enhancing their economic competitiveness and Singapore or San Francisco that benefit from high- supporting the city’s economic growth.27 Similarly, quality business environments. along with an improved business environment, Shanghai has attracted 6,168 new foreign There are no direct estimates of the potential investment projects in February-November 2019, impact of Doing Business reforms yet26, but at the an almost one-third increase over the same period city level, the Beijing government estimates that a year before, with US$17.8 billion of new foreign the business environment reforms over the last investment in place, an increase by one-tenth two years directly saved RMB 3 billion or around compared to the previous year.28 CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 15 FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE DRIVERS OF BUSINESS REGULATORY REFORMS IN CHINA C hina’s successful reforms may be attributed to six key factors: • high-level leadership and ownership of the reform for more efforts to remove barriers to market access agenda, and lower transaction costs. All local governments • local policy experimentation, were asked to explore new ways to create a healthy business environment for fair competition to • strong enforcement of the reform agenda and encourage market players to provide products and accountability for results, services of high quality.31 • robust private sector participation and effective China’s State Council directly guides the country’s communication, business reform agenda. During 2018-2020, the • intensive use of digital technologies and State Council held regular executive meetings on e-government services; and business environment reforms to receive updates on • international knowledge sharing. the reform progress and lay out new reform plans and key tasks. The State Council has also issued a series of national policy documents covering High-level Leadership and various aspects of business environment reforms, Ownership of the Reform Agenda and the latest key policies include a decision Business environment reforms have become a to replicate the good practices of Beijing and top national priority for China over the past few Shanghai on business regulatory reforms in the rest years as a means to sustain fast economic growth of China and implement the Decree on Optimizing and maintain its rapid convergence with the most the Business Environment. Moreover, as requested developed economies in the world. The reforms by the State Council, the National Development were championed by the country’s top leadership: and Reform Commission (NDRC) carried out in 2017, President Xi announced that China should evaluations of the business environment across “create a stable, fair, transparent and predictable the country to further incentivize business reforms business environment and speed up efforts to build among cities in China. The first round of pilot an open economy in a bid to promote the sustainable business environment evaluations was carried out and healthy development of the Chinese economy,” in 22 cities in 2018 and was expanded to 40 cities and urged mega-cities like Beijing, Shanghai, in 2019. The domestic evaluation system was based Guangzhou and Shenzhen to implement pioneering on the Doing Business indicators and other topics, business reforms.29 At the first “China International including protection of intellectual property rights, Import Expo” in 2018, he announced that “building market supervision, digitalization, e-government, a world-class business environment” was an innovation and entrepreneurship vitality. However, important goal of China’s further opening. He has the results of the survey have so far been kept reiterated the importance of business environment confidential, except for the three top performing reforms on multiple other occasions.30 Business cities (Beijing, Shanghai and Shenzhen). environment reform was also the first topic The local governments are mandated to follow the discussed at the first executive meeting of the State reform agenda outlined by the central government Council of China chaired by Premier Li Keqiang under the broadly centralized governance system in January 2018. At the meeting, Premier Li called in China. The business reform agenda is thus also CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 17 a top priority for local governments of Beijing In July 2018, the State Council released a list of 28 and Shanghai and has been directly guided by local good practices on business regulatory reforms top leaders in the two cities. The city top leaders by provinces/cities across the country, covering six are also involved in planning, implementing major areas—streamlining business investment and supervising the reforms. For instance, at the approval procedures, making it easier for business end of 2017, Shanghai held a plenary meeting set-up and operations, facilitating cross-border to mobilize the business reform agenda with trade, adopting innovative governance methods participation of all the top leaders; 2018 was such as classified credit management and big data- designated as the “Year of Business Reform” in based governance, providing high-quality public Shanghai; and a top-leader plenary meeting was services and promoting the “one portal, one-stop held in Shanghai to discuss the reform agenda shop, and one-time” services. The State Council on the first working day after the New Year in also required local authorities to benchmark with 2019 and 2020. In 2019, Beijing’s top leaders led and learn from such good practices and delivered a the team that visited Shanghai to exchange their clear message to support local experimentation of business reform experience, frequently visited pioneering business reforms.33 firms and government service centers to get first- The September 2019 decision of the State Council hand information and were directly involved in made it mandatory for all cities in China to follow the planning of specific reform tasks such as the good business environment reforms adopted by “butler service” scheme.32 Beijing’s mayor was Beijing and Shanghai, which is likely to accelerate responsible for coordinating the reform agenda business reforms across the whole of China and around Doing Business topics. He invited experts further enhance their impact.34 The State Council’s from the global best performing economies in decision requires cities across China to replicate Doing Business reforms such as Singapore and and scale up 13 good business reform practices of Hong Kong to share their experience, requested the Beijing and Shanghai, including starting a business, World Bank’s technical assistance in promoting getting electricity, registering property, paying taxes, business reforms, and personally led multiple on- trading across borders and enforcing contracts. The site inspections on the implementation progress. decision also listed another 23 good practices from The strong reform momentum permeated down the two cities to be voluntarily replicated, in the to the lower levels of government officials across above six areas and in construction permitting.35 the city. The Decree on Optimizing the Business Local Policy Experimentation Environment also encourages the local authorities to take innovative and differentiated measures Under the central government’s guidelines of to improve the business environment within the improving the business environment, local legal framework. Deviations and/or faults in the governments in China are encouraged to experiment local policy experimentation process, if reasonably with tailored and localized business reform policies. justified, can be exempted from sanctions. Such a In 2017, the top leaders urged leading cities like principle is also included in Beijing and Shanghai’s Beijing, Shanghai, Guangzhou and Shenzhen Decree on Optimizing the Business Environment to pioneer business reforms. The State Council implemented in April 2020.36 advertised a list of local good practices of business regulatory reforms in 2018 and issued a decision in 2019 to replicate the good reform practices in Strong Enforcement of the Reform Beijing and Shanghai across China. The model of Agenda and Accountability for Results local policy experimentation on business reforms is China has been able to implement the reform also institutionalized in the Decree on Optimizing agenda effectively in the past few years thanks to the Business Environment. several key factors: (i) the strong capacity of central DRIVERS OF BUSINESS REGULATORY REFORMS IN CHINA 18 and local governments, (ii) robust multi-level and national civil service examination each year for the multi-stakeholder coordination mechanism, and last ten years in China. In 2018, around 1.66 million (iii) an effective monitoring and evaluation system candidates competed for in total around 28,000 with performance incentives. national civil service job openings, with on average 59 candidates competing for one job opening. The Strong Capacity civil service enrollment rate has been below 1/50 in the last five years (China Economic Weekly, 2018). State authorities in China both at the central and local level have strong conceptual, organizational Robust Multi-level and Multi-stakeholder and implementation capacity. According to the Coordination Mechanism World Bank’s Worldwide Governance Indicators, China’s Government Effectiveness is significantly Coordination mechanism at the central level higher than the average for other upper-middle Over the last several years, China has set up a income economies and only slightly lower than multi-level and multi-stakeholder coordination the average for the high-income OECD countries mechanism to put forward its business environment (Figure 7). reform agenda, with National Development and Strong government effectiveness is supported Reform Commission (NDRC) and Ministry of by a largely meritocratic system of leadership Finance (MoF) as the central-level key leading appointments, supported by annual performance agencies.38 NDRC takes a leading role in reviews. National and city leaders have substantial developing the investment climate reform strategy professional and public service experience.37 Civil and coordinating its implementation in China, servants are selected and promoted based on China’s which goes beyond areas measured by Doing long tradition of meritocratic examinations and Business, while the MoF leads the reform agenda strong performance supervision. Civil service jobs specifically focused on Doing Business.39 NDRC are considered highly prestigious and are eagerly and the MoF report directly to the State Council sought after by young graduates. There have been and the Premier. more than one million candidates signing up for the Figure 7: Government Effectiveness: China, Upper Middle Income and OECD High Income Countries, 2008-2018 Indicator Country Year Percentile Rank (0 to 100) 2008 High Income: OECD 2013 2018 2008 Government Effectiveness Upper Middle Income 2013 2018 2008 China 2013 2018 0 20 40 60 80 100 Source: Authors’ own based on https://info.worldbank.org/governance/wgi/ CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 19 In July 2018, the State Council set up an inter- competition, enhancing market access of foreign ministerial coordination group for the “Fang Guan firms, promoting private investment, improving Fu” reform agenda, whose responsibilities include trade facilitation, improving the fee and expense coordinating the development and implementation supervision system, promoting intellectual of key reform policies, proposing the list of reform property rights protection and speeding up topics to be discussed at the State Council executive reforms in the public utilities industry. Moreover, meetings, addressing key reform challenges in a the agenda of working groups on streamlining coordinated way and providing guidance to local administrative procedures and on deepening authorities in enforcing the reform agenda. This business system reforms are also essentially group is directly led by the Vice Premier and concerned with business environment reforms consists of two State Councilors and the ministers through deregulation and rendering the approval of important central government agencies.40 procedures more efficient. Under these there is a dedicated working group There is also a coordination mechanism led by the for business environment improvement, along MoF around the areas measured by Doing Business, with four other working groups on streamlining which involves central government agencies and administrative procedures, promoting innovation city authorities of Beijing and Shanghai. The MoF and entrepreneurship, deepening business system is responsible for developing annual reform plans reforms and improving social services, respectively. on how to improve China’s performance in Doing The working groups directly report to the State Business and organizes quarterly joint meetings Council and the Premier. In addition, there are with central and local agencies. Beijing, Shanghai four supporting teams: (i) a general support team and other ministries are fully consulted on the that coordinates among the working groups and development of such annual reform plans. By supports the daily operations of the coordination benchmarking with global best performers in each group office; (ii) a legal team responsible for topic, the annual plan includes a detailed results- reviewing, proposing and enforcing the necessary oriented reform agenda. Its enforcement and real legal reforms to put forward the “Fang Guan Fu” progress, particularly by Beijing and Shanghai, reforms; (iii) an inspection team that inspects the is being monitored and discussed at regular joint implementation progress and collects information meetings. In June 2019, the MoF set up a dedicated on challenges faced by local authorities and Doing Business division to further strengthen the feedback of the public; and (iv) an expert team to coordination around the Doing Business reform provide research support and policy advice as well agenda. as third-party evaluation of key reform tasks (The State Council of China, 2018). Coordination mechanisms in Beijing and Shanghai The business environment working group consists of 12 ministries and central government agencies, At the city level, Beijing and Shanghai also put in including the NDRC, MoF, Ministry of Industry place a multi-level coordination mechanism to put and Information Technology (MIIT), Ministry forward the reform agenda. The system in Beijing of Housing and Rural-Urban Development is described in detail here for illustrative purposes: (MoHURD), the People’s Bank of China (PBoC) and others (Figure 8). The working group on A leading group is set up, consisting of top municipal business environment improvement organizes government leaders, to provide overall guidance regular consultation meetings with representatives on the reform agenda across the city. The Beijing from the public agencies and the private sector, municipal Development and Reform Commission foreign chambers of commerce and foreign owned (DRC) is the leading agency for coordinating the companies in China.41 The agenda of the working implementation of the whole reform agenda with group on business environment reform includes other peer agencies and communicating with the removing institutional barriers to fair market MoF and other ministries. In 2019, Beijing DRC DRIVERS OF BUSINESS REGULATORY REFORMS IN CHINA 20 Figure 8: The National-Level Coordination Mechanism for Improving Business Environment in China The State Council The Inter-Ministeral Coordination Group on “Fang Guan Fu” Reforms Team Leaders: Vice Premier and 2 State Councilors Working Group on Working Group on Working Group on Working Group on Working Group on Business Environment Streamlining Administrative Promoting Innovation and Deepening Business Improving Improvement Procedures Entrepreneurship System Reforms Social Services Team Leader: Deputy Secretary- Team Leader: Deputy General of the State Council Director of NDRC Co-Team Leaders: Deputy Co-Team Leaders: Vice Director of NDRC, Vice Minister/Deputy Heads of Minister of MoJ, Vice Minister MIIT, MoF, MNR, MEE, of MoHURD, Deputy MoHURD, MoC, PBoC, GAoC, Director of SAMR SAMR, MoE and NIPA Local DRCs (Leading) and other Relevant Local Authorities Note: MNR—Ministry of Natural Resources; MEE—Ministry of Ecology and Environment; MoC—Ministry of Commerce; GAoC—General Administration of Customs; SAMR—State Administration for Market Regulation; MoE—Ministry of Energy; NIPA—National Intellectual Property Administration; MoJ—Ministry of Justice. Source: Authors’ own. set up two dedicated divisions to focus on business of the municipal government and between Beijing environment evaluation and policies. There is and its peer cities. also a specific leading agency designated at the municipal level for each reform area measured by Effective Monitoring and Evaluation Doing Business. Regular inter-agency joint meetings System with Performance Incentives are held to discuss the list of reform tasks, the implementation progress and its challenges. In 2019, China adopted a target driven performance more than 60 such meetings were chaired by the management system of government officials with a mayor/vice mayor and high-level municipal officials formalized “objective responsibility system” in the and more than 200 cross-agency meetings took place mid-1990s. In this nationwide system, governments at the working level. The multilayered inter-agency at higher administrative levels set targets for lower- coordination system ensures concentrated reform level administrators and hold them accountable efforts and removes barriers of silo work. Box 6 for meeting them. Over time, targets have become provides more details on the multi-level coordination increasingly specific, quantifiable, and linked to civil system in Beijing, which allows the city to integrate service performance evaluation. The system also reform efforts at the national, municipal and lower helps the central government to guide and influence district levels and coordinate among various agencies local governments (Burns and Zhou, 2010). CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 21 Box 6: The Multi-level Coordination Mechanism in Beijing to Put Forward the Reform Agenda • A working group was established with 165 representatives from 56 relevant agencies and 16 districts in Beijing to implement business reforms, organized around each reform area. • A top-down communication mechanism was set up connecting dedicated personnel at the municipal level agencies and lower district level agencies, and Beijing DRC is leading the efforts to promote district agencies set up their own dedicated departments on business environment reform. • Beijing municipal government gets inputs from and consults with the private sector on business reform policies through the institution of Municipal Standing Committee of People’s Congress where the private sector representatives also sit. • Beijing set up a joint working group with the neighboring Tianjin Municipality to put forward cross-border trade reforms as the most widely used border crossing for Beijing is the port of Tianjin. The working group is led by the responsible vice mayors of the two cities and regular meetings are held between the two cities. • Beijing has set up a mechanism to hold regular peer exchange activities with provinces/ cities like Shanghai, Tianjin, Chongqing and Hebei Province to share experiences and lessons in the reform process. Source: Authors’ own based on public interviews with the relevant government officials and news reports on business reforms in Beijing. Specifically concerning the business reform led by ministerial officials to 16 provinces, cities agenda, the State Council holds a nation-wide and autonomous regions to check on the progress video conference every year on “Fang Guan Fu” with reform implementation, including tax and reforms and business environment improvement to fees reduction, business environment reforms summarize the annual reform progress and deploy and innovation promotion.43 Issues with reform the work plan for the next year. The video conference implementation are delegated to relevant agencies is chaired by the Premier and/or Vice Premier and is for correction and underperforming leaders are attended by top leaders of all relevant government disciplined.44 The State Council publicizes on agencies at the central and local levels. Following the its website and circulates a notice of criticism conference, a detailed work program is distributed of selected local malpractices found during to all levels of government, listing in detail the key inspections, as well as a list of recommended good reform tasks with designated responsible agencies reform practices.45 and a completion deadline. The implementation The MoF, along with other relevant central progress by each relevant government agency needs government agencies, carries out annual joint to be reported in writing to the State Council by the inspections on the implementation progress around end of the year, including the achievement of major reform areas measured by Doing Business in Beijing milestones and discussion of key challenges.42 and Shanghai. The inspections are usually carried out The State Council also carries out annual on-site unannounced, as a way of “checking by seeing and inspections in selected provinces/cities to check experiencing” on the site. An inspection summary the real progress in implementing “Fang Guan report focusing on the shortcomings is then shared Fu” reforms and other topics. For instance, in with Beijing and Shanghai and relevant agencies for 2019, the State Council sent an inspection team them to take remedial actions. DRIVERS OF BUSINESS REGULATORY REFORMS IN CHINA 22 There is a top-down monitoring and evaluation representatives, carried out in-depth interviews with system to ensure effective implementation of the 120 entrepreneurs and business owners in Shanghai reform agenda in Beijing. It includes regular progress and sent out 1,077 questionnaires to get feedback reporting (weekly progress reporting since 2019), from the private sector on the business environment random checks and unannounced field inspections. in Shanghai in 2019.47 In 2019, Shanghai also Beijing municipal government has hired third parties established an advisory committee on business to carry out regular surveys of the public and business reforms, the first such committee in the country. It community recording their satisfaction with and consisted of 24 members who were all experienced comments on the business environment in Beijing. practitioners and experts from various sectors A detailed list of all the issues and challenges found including foreign and local business associations, by the progress monitoring activities are recorded, industrial parks, law firms, accounting firms, discussed and allocated to relevant agencies for academia and research institute, high-tech industry, further actions, with a timeline of completion. medical industry and information technology industry.48 Each member has a tenure of two years, Many countries around the world have introduced which could be further extended. incentives for public officials to promote Doing Business reforms. China is no different. Over the Beijing has also become more active in engaging past few years, enforcement of the business reform with stakeholders on business regulatory reforms. agenda has become an important component of For instance, in 2019, the Beijing municipal the performance evaluation of each responsible government organized 133 consultation meetings agency and the public officials involved.46 For with more than 1,000 representatives from the instance, in the annual performance evaluation of private sector, the academia and other sectors for individual public officials, there is usually a fixed their comments and suggestions for the upcoming quota for the maximum number of individuals that BERS version 3.0.49 The government agencies can get a top rating of “excellent”. In 2018-2019, also organized information sessions for firms a high proportion of civil servants in Beijing who and professional agencies including law firms, implemented the business reform agenda got such a accounting firms and architecture studios to apprise top rating and other municipal-level honorary titles. them of new policies and receive their feedback— Given the high-profile of the business reform agenda, more than 1,900 such information sessions were a number of public officials were promoted during organized in 2019.50 the last two years owing to their strong performance Reform policies were also communicated to the in implementing business reforms. public through diverse online channels including the wide use of social media, mobile apps and Robust Private Sector Participation others. For instance, specific columns were set up and Communication on Beijing’s municipal government portal with There has been increasing consultation and policy links in both Chinese and English and videos collaboration with the private sector in the reform explaining the reform policies. Like Shanghai, process in China, along with growing awareness besides the government service portal, Beijing also that business regulatory reforms should be centered launched a “Beijing Tong” mobile app, and public around the private sector’s needs. As pointed services were also made available on WeChat and out by the top leader of the Shanghai Municipal Alipay, the two most popular multi-functional social Government, the question of whether the business apps in China.51 These mobile channels provide environment is good or not heavily depends on the similar online e-government services as the portal. feedback of the enterprises. Therefore, Shanghai More than 600 service items can be applied and has made great efforts to engage the private sector. processed online or through mobile apps including During 2018-2019, the municipal government “Beijing Tong” app, WeChat and Alipay.52 organized 16 working meetings with private sector CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 23 Beijing government has also launched a special complaints. Each registered individual or firm “one-on-one butler service” scheme to directly (either on the single window portal or on the app) engage the private sector, understand their needs will be granted a permanent identity that allows the and feedback and address their challenges in user to access the applicable services based on the business operations in the most efficient way. In identity and verified eligibility information shared such a butler service system, the Beijing DRC as among agencies connected to the portal. By the end the “chief steward” is responsible for coordinating of 2018, the “single window portal” had around the implementation of the city’s “service package” 7.5 million registered individual users and almost system and various industrial regulatory authorities 2 million registered corporate users, and the App as “industry stewards”, formulating service plans had more than 10 million registered users (Tao, according to firm requests; and the municipal 2019). Currently, all public services are available investment promotion center as the “service online. Shanghai has also used cloud technologies steward” provides firms with “one-on-one” to connect administrative service data on the portal services. The “butler services” have been provided with data from the offline government service to 1,624 companies by the end of 2019, the vast offices.55 majority of which are foreign invested or privately- E-government services are also widely used in owned enterprises.53 Beijing, with more than 90 percent of services by the municipal and district level governments Intensive Use of Digital Technologies made available online. Beijing has applied digital and E-Government Services technologies to set up a “catalog block chain” Shanghai has substantially improved its that integrates the “responsibility catalogue” and administrative efficiency and made it easier to relevant data of 53 municipal agencies into a city- do business by setting up China’s first “single wide “data catalog”. Such a catalog allows for window portal” integrating city-wide cross-agency timely and orderly sharing and reviewing of all the government services through block chain, big relevant data of connected agencies.56 Beijing has data and other digital technologies. Cross-agency also adopted block chain technologies in specific data sharing has historically been a bottleneck areas like property registration and business start- for administrative efficiency. To address such up. For instance, Beijing started a pilot application challenges, in 2018 Shanghai set up a Big Data of block chain technologies in property registration Center, which leads the agenda of integrating and in its Haidian District, which has allowed for sharing public service-related data across the city. sharing of 12 types of national and municipal data It has organized databases covering demographic such as demographic data, business license data, data, corporate information, geographic cadastral data and litigation data. More than 1,500 information, credit information, data of electronic property registration cases have been processed licenses and permits, macroeconomic data, and with block chain technologies since May 2019, and other topic-specific databases.54 Supported by the the reviewing and verifying time of each application big data center, Shanghai subsequently launched document has been reduced from 15 to 2 minutes, the municipal government service single window according to the government.57 The courts have portal where public services are structured around also been increasingly using online systems for the users of the system. When first launched, it case filing and processing in Beijing. Since 2019, connected 46 municipal public agencies, 16 district general cases can be filed online at the website of governments and 220 street level government Beijing court system or through the courts’ account service centers. Besides the portal, the city also on WeChat app.58 Following the establishment of launched a mobile app with the same functions the Beijing Internet Court in September 2018, the where registered users can access service guidelines, entire process of certain types of internet related make appointments, check progress and even file cases from filing to enforcement can be completed online.59 By February 2020, the Beijing Internet DRIVERS OF BUSINESS REGULATORY REFORMS IN CHINA 24 Court has completed the processing of around participants attended the conference in 2018 and 44,000 cases; all of them were filed and fully 2019, respectively. The conferences were attended archived online and 99.6% of the court trials took by top level officials from China and abroad, place online.60 including the Deputy Secretary General of the State Council of China, the Minister of Finance, International Knowledge Sharing the mayors of Beijing and Shanghai, the President of the World Bank Jim Yong Kim, and high- The Chinese authorities emphasized the importance level policy makers from the Russian Federation, of leveraging international good practices in business New Zealand, the Republic of Korea, Singapore, regulatory reforms and sharing practitioners’ Cambodia, Vietnam and Mongolia. There were also knowledge to guide the reforms. To that end, for representatives of central and local authorities from instance, the Ministry of Finance and the World across China, foreign officials and World Bank Bank Group co-organized high-level international experts. The representatives from China and the conferences on Doing Business Practice and participating economies shared reform experiences Reforms with the Shanghai Municipal Government and good practices on the selected topics. in Shanghai in March 2018, and with the Beijing Municipal Government in Beijing in November Moreover, with the assistance of the World Bank, 2018 and 2019, respectively. The objective of the a delegation of policy makers from the MoF and peer-to-peer conferences was to (i) discuss the other central government agencies went on an results of the substantial reforms in improving the international study tour to Singapore in 2018 to study business environment in Beijing and Shanghai, (ii) that city’s high-performing business environment share the lessons learned with other cities in China and to Russia in 2019 to learn about the country’s and abroad, and (iii) support the Chinese authorities successful business reforms, including in property in their further efforts to improve the business registration, construction permits, and paying taxes, environment by sharing global good practices in which over the previous five years helped catapult doing business reforms from successful reformers Russia from 92nd place in Doing Business 2014 to such as the Russian Federation, New Zealand, the 28th place in the Doing Business 2020 ranking. Republic of Korea, United Kingdom, Singapore International financial institutions provided and Japan. additional support for China’s knowledge The conference each year focused on several absorption and business reforms. The World Bank, priority areas selected by the Chinese authorities, for instance, supported China’s business reforms by such as starting a business, construction permitting sharing just-in-time policy advice, providing reform regulations, registering property, getting credit, memoranda, policy papers and diagnostic reports on resolving insolvency and trading across borders, but international good practices in business reforms for it also discussed how business regulatory reforms key regulatory areas and how they apply to China, were effectively implemented in other economies. and organizing multiple technical workshops and other engagements. Other international institutions The conferences have garnered much interest such as the International Monetary Fund (IMF) among policy makers and stakeholders from have provided additional support through their China and abroad. Close to 200 and around 350 annual Article IV consultations. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 25 FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE CONCLUSIONS AND POLICY RECOMMENDATIONS C hina has achieved remarkable success in reforming its business environment over the last few years, as reflected in the country’s improvement by almost 50 positions in the Doing Business ranking and becoming a top 10 global reformer for two years in a row. There were six key drivers of this success. First, removed the key barriers that prevent them from China has shown strong leadership and ownership starting, operating and growing their businesses. of the reform agenda, which has been championed Fifth, China’s success in reforms was driven by an by the President, the Premier and the State Council, intensive use of big data, block chain and cloud as well as the top leaders in Beijing and Shanghai. computing technologies to facilitate e-government Such strong leadership has generated a considerable services. Beijing and Shanghai leveraged China’s reform momentum under a broadly centralized well-developed digital economy to re-organize governance structure in China. government functions to link administrative Second, China has encouraged local governments databases together and put government services to undertake tailored and localized business reforms online. Both cities have now become global leaders and pioneer policies that could then be promoted in the use of e-government in supporting private at a larger scale. Such approaches to local policy sector development. experimentation has helped strengthen the local Finally, Chinese authorities were eager to learn governments’ incentives to innovate and promote from others and absorb international best practices successful reforms through policy learning and in Doing Business reforms. They sought assistance adaptation. from international institutions, such as the World Third, to ensure effective implementation of the Bank Group, co-organized multiple events to learn reform agenda, China has put in place a strong from the practical experience of other economies, incentive and accountability system and robust and implemented the selected best practices, tailored multi-stakeholder coordination system at both the to local context. central and city level (in Beijing and Shanghai) that However, despite the recent progress, the Chinese integrated the reform efforts across various agencies authorities are aware that past success does not and sectors. There is regular monitoring and guarantee future success and further efforts are evaluation of the reform progress, which is also an needed to put China among the global best performers important component of the performance evaluation across all Doing Business topics and beyond. As of government officials. High state capacity, based often emphasized by the Chinese policymakers, on largely meritocratic appointments, strong work “there is no best business environment, only better ethos and the high prestige of civil servants, have business environment[s]”. also been helpful. Within the Doing Business framework, further Fourth, stronger engagement with the private sector improvements can be achieved in areas such as getting was key. Beijing and Shanghai have both moved credit, resolving insolvency, paying taxes and trading from a government-driven work model towards a across borders, in which China lags behind its global more open way to put forward the reform agenda, and regional peers. There is also room to further with more engagement and communication with the improve construction permitting, starting a business private sector. This helped ensure that the reforms and registering property, including by following effectively addressed entrepreneurs’ concerns and CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 27 practices adopted by the global top performers Going forward, it will be critically important to such as New Zealand, Singapore and the Republic effectively replicate the good reform practices of Korea. Finally, many of the reforms adopted in deployed in Beijing and Shanghai around the whole the last two years still need to be supported by more country and upgrade the institutional and regulatory robust cross-agency coordination. Enforcement of frameworks to sustain the momentum of reform. new regulations also needs to be enhanced. While Beijing and Shanghai were the top two Table 2: Key Reform Recommendations for Selected Doing Business Areas in China Indicators Medium- to Long-Term Recommendations Starting a 1. Transition to a fully integrated electronic data-centric company registration system Business 2. Introduce electronic seal and invoicing 3. Introduce systematic user feedback mechanisms. Dealing with 1. Strengthen risk-based approaches for all types of buildings Construction 2. Improve inter-agency coordination and ensure clear and consistent building regulations and their application Permits 3. Strengthen regulation of building professionals including through licensing, auditing and probity regime of building practitioners and an obligatory liability insurance regime Registering 1. Further consolidate all information related to the property through one connected database with a single Property access point (and certificate) 2. Create an electronic platform for the Real Estate Registry and introduce the possibility of online property transfers (including fee and tax payments) 3. Complete the formal registration and mapping of land plots across China Trading 1. Strengthen cooperation and coordination of all border agencies by promoting adoption of risk-based Across compliance management solutions by other cross border regulatory agencies Borders 2. Strictly implement paper-free processing and consider upgrading China’s port-based platforms for providing e-services to traders and logistics operators 3. Develop automatic Time Release Study (TRS) measurements for all processes and services covered by the Trade Single Window, logistics control and clearance systems, as part of the ongoing plans to streamline and simplify procedures. Getting 1. Reform the current law into an integrated legal and institutional framework that deals to the fullest extent Credit possible with all types of debtors and creditors, businesses and consumers, for the widest possible range of debts and obligations, covering the widest possible range of movable assets, and all forms of secured transactions 2. Make institutional amendments for a centralized computerized notice-based system 3. Design and implement a system for disseminating decisions among the judiciary, for information and guidance, and to improve consistency across the regions on cases with similar facts Resolving 1. Improve the commencement process by introducing incentives to initiate proceedings in case of financial Insolvency distress and providing greater clarity on commencement issues 2. Consider creating a new pre-insolvency proceeding, and/or substantially reinforce the existing “composition process” 3. Strengthen the insolvency administrator’s regulations by homogenizing rules and enhancing predictability throughout the country 4. Enhance training of the judges and provide capacity building to insolvency administrators Source: The World Bank. CONCLUSIONS AND POLICY RECOMMENDATIONS 28 performers in China’s own business environment stamps and signatures or to implement joint approval ranking carried out by the NDRC, other cities in for firm investment projects (Zhang and Ma, 2019). China lag behind the two top-performing cities, often There is also lack of predictability in enforcement substantially.61 Given the size of China’s economy, of regulations in some cases because of inconsistent upgrading the regulatory frameworks in all cities discretionary authority of entities at both the local around the country would have a tangible impact on and the central levels (Ding and Zhou, 2020). More China’s and the global economy. transparency, stronger cooperation with the private sector and additional institutional and legal reforms Table 2 highlights selected policy recommendations would be essential for China to sustain its business for the remaining reforms in a few Doing Business reform momentum. areas, identified through discussions with the government and the private sector and based on the Fourth, the political economy of reforms will be World Bank’s analytical and advisory work,62 which a challenge, as vested interests that stand to lose would help China sustain its reform momentum from market opening, lower barriers of entry and and continue to improve its business environment, decreasing rents, may oppose further reforms. China including as reflected in Doing Business. will need an efficient mechanism to mitigate these political economy risks going forward (Bai, et al, However, Doing Business reforms are only one 2019; Long et al, 2020). element of the overall business environment and investment climate. China also faces broader Finally, despite the recent reforms, there is still a large institutional, political economy and legal challenges unfinished reform agenda focused on strengthening in further improving its business environment. the rule of law, promoting competition and ensuring a level-playing field for all companies, including First, despite a massive improvement in private and foreign-owned companies. There is e-government service platforms, data sharing also much to be done to open the remaining sectors among various government institutions continues to of the economy, especially services, effectively be a major challenge. Public access to data is also implement the provisions of the FDI law, and adopt difficult, including to domestic business environment international norms such as the OECD competitive evaluations such as the NDRC ranking, which neutrality principles on the treatment of SOEs remains confidential. (World Bank Group and DRC, 2019, PBoC and IMF, Second, there is much scope to further strengthen the 2019). It would also be useful to further strengthen quantity and the quality of feedback from the private effective IP protection, invest in human capital and sector. The current surveys tend to happen only ad make public support policies more transparent, hoc. There is no clarity on the feedback loop within including by increasing the participation of the the government and the results of the surveys are private sector, publishing all regulations online and rarely available publicly. opening up access to data. All these measures would not only help reinvigorate the growth of the domestic Third, the existing legislative framework needs to economy, including that of the private sector, but at be further upgraded to ensure strong enforcement of the same time also address the concerns of China’s business reforms. For example, current legislation trading partners. makes it difficult to implement electronic licenses, CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 29 FINANCE, COMPETITIVENESS & INNOVATION INSIGHT | INVESTMENT CLIMATE ENDNOTES 1. Contracting with the Government may be included in the future. More information on Doing Business is available at https://www.doingbusiness.org/. 2. See Doing Business 2020 for additional studies on the economic impact of Doing Business reforms. 3. Provisions (III) of the Supreme People’s Court on Several Issues concerning the Application of the Enterprise Bankruptcy Law of the People’s Republic of China (the new Judicial Interpretation). 4. The single window can be accessed at https://www.singlewindow.cn/. 5. The Decree is available at http://www.gov.cn/zhengce/content/2019-10/23/content_5443963.htm. 6. A uniform social credit code is a “digital identity” code unique to each firm and institution in China. More information can be found at https://www.cods.org.cn/zhfw/dmzs/. 7. For more information, see http://www.gov.cn/zhengce/zhengceku/2019-11/08/content_5450252.htm. 8. According to Beijing DRC, the Three-Year Action Plan to Further Improve Business Environment in Beijing was developed jointly by Beijing DRC and other 55 municipal government agencies as well as State Grid, after rounds of discussions on key reforms. It was also consulted with the members of the municipal people’s congress and SME representatives. The following three BERS were mainly detailing and updating the reform tasks outlined in the Three-year Action Plan. 9. More information about the BERS in Beijing is available at: http://www.beijing.gov.cn/zhengce/ zhengcefagui/rmzc/201911/t20191113_499712.html. 10. Based on information from the government. There are no corresponding private sector data. 11. Press release by Shanghai DRC, http://www.cnr.cn/shanghai/tt/20190809/t20190809_524725569. shtml. 12. See more at http://www.shanghai.gov.cn/nw2/nw2314/nw2319/nw12344/u26aw58411.html. 13. Based on information from the government. There are no corresponding private sector data. 14. Under the system of “notification and commitment-based approval procedures”, a business applicant may be granted a license or a permit based on a written commitment, which can be later audited. See more at http://www.shanghai.gov.cn/shanghai/node27118/node27386/node27408/n44161/n44220/ u26ai57991.html. 15. The full text of the Administrative Measures for the Notification and Commitment of Administrative Examination and Approval in Shanghai can be accessed at http://www.shanghai.gov.cn/shanghai/ node27118/node27386/node27408/n44161/n44220/u26ai57991.html. 16. The single window portal for public services can be accessed at http://zwdt.sh.gov.cn/govPortals/index.do. 17. More results of the survey can be found at http://www.acfic.org.cn/yw/qlyw/201911/t20191104_144853. html. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 31 18. The State Council of China, December, 2019, http://www.gov.cn/zhengce/2019-12/19/content_5462450. htm. 19. For more detailed information, see the Survey Report of Business Environment in China in 2018, available at http://www.ccpit-academy.org/v-1-4174.aspx. 20. A full list of business reforms in China acknowledged by the Doing Business report can be found at https://www.doingbusiness.org/en/reforms/overview/economy/china. 21. Beijing Administration for Market Regulation, http://scjgj.beijing.gov.cn/zwxx/tjsj/202003/ t20200318_1720563.html. A reason for the small growth in the number of new firms set up in Beijing is that Beijing started an initiative to de-register firms and restrict certain types of new firm registration in the city in 2017 in line with its capital city repositioning. Beijing also has the largest number of SOEs in the country. 22. A unicorn company is a start-up company with a valuation of at least US$1 billion. The data are provided by the Beijing municipal government. 23. Economy Daily, Dec. 12, 2019, “Business Environment Improvement in Beijing”, http://www.gov.cn/ xinwen/2019-12/12/content_5460480.htm. 24. Based on data from Shanghai Administration for Market Regulation accessed in March 2020. 25. Xinhua News, January 3, 2020, “Shanghai launched its Business Environment Reform Scheme 3.0”, http://www.xinhuanet.com/local/2020-01/03/c_1125417088.htm. 26. A new World Bank project aims to estimate the impact of the business reforms in Beijing and Shanghai. The first estimates are projected to be available by the end of 2020. 27. The RMB 3 billion savings in operating costs were calculated by Beijing municipal government, which included an annual saving of around RMB 60 million in stamp fees for firms through providing free stamps, an annual cost saving of around RMB 600 million through conversion into electronic bidding process for construction projects and an annual saving of around RMB 800 million through free connection of utilities for small and micro businesses. 28. Xinhua News, January 3, 2020, “Shanghai launched its Business Environment Reform Scheme 3.0”, http://www.xinhuanet.com/local/2020-01/03/c_1125417088.htm. The numbers are quoted from Shanghai municipal government. 29. Xinhua News, July 17, 2017, “Xi urges faster opening up, better business environment”, http:// chinaplus.cri.cn/news/china/9/20170717/8975.html 30. Chengdu Daily, 2019, January 13, “President Xi talks about business environment reforms”, http:// www.cdrb.com.cn/epaper/cdrbpc/201901/23/c34618.html. 31. Xinhua News, January 7, 2018, “The State Council makes plan for business environment improvement”, http://www.xinhuanet.com/politics/2018-01/07/c_1122220789.htm. 32. The “One-on-one butler service” scheme is designed to directly engage and serve the private sector. The next section on “Robust private sector participation and communication” provides more details on this initiative. ENDNOTES 32 33. The State Council’s “Circular by the General Office of the State Council on Some Typical Local Practices in Improving the Business Environment” can be accessed at http://www.gov.cn/zhengce/ content/2018-08/03/content_5311523.htm. 34. For more details, see “The State Council Notice on Replicating and Scale-up of Good Practices in Business Environment Reforms available at http://www.gov.cn/zhengce/content/2019-09/19/ content_5431319.htm. 35. A detailed information of all the good practices of Beijing and Shanghai can be found at http://www. gov.cn/xinwen/2019-09/19/content_5431347.htm. 36. The Decree on Optimizing the Business Environment released by the State Council can be found at http://www.gov.cn/zhengce/content/2019-10/23/content_5443963.htm; the Decree released by Beijing can be found at http://www.beijing.gov.cn/zhengce/zhengcefagui/202004/t20200401_1781837.html; the Decree released by Shanghai can be found at http://www.shanghai.gov.cn/nw2/nw2314/nw2319/ nw12344/u26aw64686.html. 37. The mayor of Beijing, Chen Jining, for instance, is the former President of Tsinghua University, one of the leading universities in China and globally, and Minister of Environmental Protection. The mayor of Shanghai, Ying Yong, is a former President of the Shanghai High Court. In February 2020, in recognition of his strong performance, Ying was appointed Party secretary of Hubei (with a capital in Wuhan) to fight the coronavirus pandemic. 38. The National Development and Reform Commission (NDRC) is in charge of China’s macroeconomic planning. It is responsible for formulating and implementing strategies for national economic and social development and coordinating major economic operations. More information on the NDRC can be found at https://en.ndrc.gov.cn/. 39. The Ministry of Finance mostly takes the lead in the coordination work with Beijing, Shanghai and the World Bank on how to improve China’s performance in Doing Business. 40. It is directly led by Vice Premier Han Zheng and two State Councilors, Wang Yong and Xiao Jie. 41. NDRC, http://www.gov.cn/xinwen/2018-10/30/content_5335891.htm, accessed in February, 2020. 42. The latest annual reform agenda released in August 2019 can be accessed at the website of the State Council at http://www.gov.cn/zhengce/content/2019-08/12/content_5420694.htm. 43. The State council, http://www.gov.cn/zhengce/2019-10/24/content_5444426.htm. 44. The state Council, http://www.gov.cn/guowuyuan/2019-11/12/content_5450989.htm. 45. A list of malpractices in implementing the “Fang Guan Fu” Reforms and business reform agenda discovered during the 6th national inspection in 2019 can be found at http://www.gov.cn/ guowuyuan/2019-11/12/content_5450989.htm. 46. Long tenure is a key merit of the civil service jobs in China, and it is rare to fire public servants unless they breach party discipline or break the law. The performance evaluation system is directly linked to promotions, which matter the most in the hierarchical political system in China. 47. Jurisprudence Daily, September 27th, 2019, “ Beijing and Shanghai’s experiences in improving business environment to be replicated by the State Council”, http://www.chinanews.com/gn/2019/09- 27/8966754.shtml. CHINA’S DOING BUSINESS SUCCESS: DRIVERS OF REFORMS AND OPPORTUNITIES FOR THE FUTURE 33 48. A full list of the first 24 advisory committee members can be found at http://fgw.sh.gov.cn/xxgk/ cxxxgk/36586.htm. 49. Beijing Youth Daily, November 13, 2019, “Beijing Launched Business Reforms Version 3.0”, http:// epaper.ynet.com/html/2019-11/13/content_341627.htm?div=-1. 50. Beijing DRC. 51. WeChat and Alipay both provide access to many types of city services such as making utilities payments and medical appointments. 52. Beijing municipal government website, http://fgw.beijing.gov.cn/index_13945/xwfb/202001/ t20200114_1575039.htm#top. 53. Data provided by Beijing DRC. 54. Construction of such databases is still ongoing. 55. 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