China jumps from 76 to 46 in World Bank “Ease of Doing Business” report

9 November 2018


Released on 1 October, the Doing Business 2019 report by the World Bank makes fascinating reading once again. One stand-out change is the huge overall gain made by China in the global rankings, up by 30 places in the last year, to 46 out of 190 countries – by far the largest gain by a major economic power (only Afghanistan and Djibouti climbed by more points).

Doing Business applies eleven indicators categories to a theoretical standard business, namely:

  • starting a business
  • dealing with construction permits
  • getting electricity
  • registering property
  • getting credit
  • protecting minority investors
  • paying taxes
  • trading across borders
  • enforcing contracts
  • resolving insolvency
  • labour market relations

This year, China has made significant gains against nearly all of these indicators.  For instance, the  number of days required to start a business in China has more than halved (down to 9) and the number of procedures involved has been cut too, by the merging a number of licences and creation of a user-friendly digital portal (called, in typical Chinese fashion, “One Window, One Form”).

The greatest single change in China’s ratings related to the “getting electricity” indicator, where she leaps from 98 to 14 in the rankings, mainly due to expanded infrastructure and reduced costs. 

Regrettably no great improvements have been achieved regarding “paying taxes” – China’s tax system is notoriously difficult to negotiate, and only a slight gain was made in that area, despite major changes being made to the VAT system.

Good news overall, though, as the Doing Business China summary report attests.

What does this mean for foreign businesses in China?

If you’re non-Chinese business doing business with China, what might this all mean?  Well, there are a number of reasons why foreign business should exercise caution with regard to the report.

Firstly, the theoretical business on which this is all based is unlike yours in at least one key respect.  “To make the data comparable across 190 economies, [Doing Business imagines] a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals.  The process of getting a business registered and operational in China is much more difficult for foreign companies than for domestic ones, not primarily because the processes are different for the two, but because of foreign companies’ lack of ability to understand and deal with normal business life in China (including language, recruiting, banking etc.).

Secondly, though Doing Business does sometimes compare information from Shanghai and Beijing, it does not take into account that China varies massively from region to region (see our article on China’s Regional Variations for more about this).  What is easy in Shanghai may be almost impossible in Urumqi or Lhasa, for example.

Thirdly, the claim of western businesses with registered companies in China is that it is actually becoming a harder place to operate in a number of respects.  As one example, American Chamber Of Commerce in China’s Business Climate Survey (411 companies responding) found that 75% felt less welcome in China than before, citing preferential treatment for domestic companies, protectionism, and uneven law enforcement among their reasons.  To these can be added tighter controls on cross-border money transfers and a crackdown on VPNs – both of which affect foreign companies in China much more than the theoretical domestic business in the Doing Business model.

Fortunately, help is at hand.  There are a number of excellent support options for selling into China, ranging from cross-border ecommerce, through hands-off distributor models, all the way through to a setting up a fully managed in-China business.  Chamber International can introduce you to the fill range, and connect you with experienced, service providers in China who, in our estimation, can make China’s “Ease of Doing Business” score a practical reality for you, in a way that suits your business needs and budget.

Contact our China specialist Matthew Grandage for a consultation and assistance.


Follow Chamber International on Twitter @ChamberInt and on Facebook to learn about upcoming events.