CONFIDENTIAL
                                                                                   EDS2005-1467
                                                                                 December 12, 2005
                                                                                      05:04:23 PM


Statement by Jiayi Zou, Executive Director for China
Date of Meeting: December 13, 2005

                                Doing Business Methodology

       We welcome this opportunity to discuss the Doing Business methodology. We support
IFC’s efforts in improving business climate for its clients and welcome recommendations and
assistance by IFC in this regard. However, we would like to raise a number of concerns over the
methodology used, ranking of ease of doing business and the Board guidance for this exercise.


       First, we find it difficult to align the fact that China has become the largest destination for
FDI in the developing world from 1992 and the 91st rank out of 155 countries covered by the
Report. We would welcome elaborations by the staff on this issue.


       Second, we noted that on page 77 of the Report, Data Notes, one of the “ limitations of
the methodology is that in many cases the collected data refer to businesses in the country’s most
populous city and many may not be representative of regulatory practices in other parts of the
country”. In the case of China, Chengdu, an inland city, was chosen as the sample. Despite the
fact that the IFC program in Chengdu is well underway, the city is by no means representative in
term of business climate in China. Obviously, the score for China can not be meaningful
provided that it was derived from one-city data. Statistically, sample has to be big enough to
generate a useful result. Therefore, we believe that future reports should not contain the ranking
of ease of doing business given pre-mature nature of its methodology and the Bank’s weight in
announcing such sensitive messages. Without proper precautions and caveats, the signal could be
misleading to the outside world.


       Third, we also believe that future exercise of this Report and any possible use of its
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results in the operation should be under stricter Board guidance.


          Finally, we encourage IFC and the Bank to work together to further improve the
methodology of assessing business climate in member country in a more comprehensive,
objective and practical approach.


          Thank you.




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