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Doing business in China becomes easier after cutting red tape

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Via Financial Times

China has leapfrogged France, the Netherlands and Switzerland as a place to do business according to a flagship annual ranking produced by the World Bank, after slashing red tape by expanding the use of technology by its bureaucracy. 

Its advances, which propelled it from 46th place last year to 31st place out of 190 countries, are part of a broader trend of convergence in regulatory and administrative practices between emerging markets and advanced economies.

India too has been steadily rising in the World Bank rankings and is in now in 63rd place, higher than Luxembourg, while Pakistan and Nigeria had also made significant improvements. 

Simeon Djankov, director of development economics at the World Bank, said heightened trade tensions around the world were forcing countries to implement pro-business reforms to offset the uncertainty.

“[Countries say] ‘in the past we depended a lot on global trade to bring up exports and growth, but now we depend less on the external sector, we need to depend a lot more on domestic growth and consumption’,” Mr Djankov told the Financial Times.

China improved its position by digitising government services, he added: “They are going the Singaporean way . . . you can establish a company online, you can pay taxes online, you can get licences online.”

The rankings were calculated in May this year and are based on the business climate for domestic entrepreneurs — so do not incorporate the treatment of foreign investors.

Even as it has risen up the World Bank rankings, China has faced growing accusations that it is discriminating against international companies by forcing them to hand over technology and limiting their access to its market. Individual liberties and human rights standards are also not considered by the World Bank report. 

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Saudi Arabia, which has come under fierce criticism over last year’s murder of journalist Jamal Khashoggi, jumped much higher in this year’s ranking, to 62nd place, just four notches below Italy — and other Gulf countries, particularly Bahrain, also improved their standing.

Mr Djankov pointed to Saudi reforms, driven by the need for diversification in light of volatile oil prices and fears of social unrest, which helped push it up the rankings. But he acknowledged that the climate for female entrepreneurs lagged much of the rest of the world. 

New Zealand remained at the top of the World Bank rankings, as it was last year, while Somalia sat at the bottom, as it did previously. The US and the UK consolidated their positions in the top 10.

Hong Kong was in third place, but the assessment predated the protests that have erupted in the city-state in recent months. Mr Djankov said Hong Kong’s position would be “a lot worse” if current conditions were taken into account, since the closure of government offices would make it more difficult for businesspeople to access services. 

One notable exception to the advances in the regulatory environment across emerging markets was Latin America. Brazil slid to 124th place and Argentina fell back to 126th place. Chile was the best performer in the region, but was only ranked 59th, compared with its position in the top 25 a decade ago. 

“Latin America seems to be a sinking continent [with respect to] competitiveness,” Mr Djankov said.

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