Highlights of the Doing Business Report 2020
In the World Bank Group's Doing Business 2020 study, an annual project evaluating countries' business environment for small and medium-sized enterprises, China for a second year found itself among the top 10 countries where the business climate has improved the most.
China's ranking in the Doing Business 2020 study climbed to 31st place in terms of ease of doing business, up from 46th a year earlier and 78th in 2017. This is the first time the country has made it into the top 40.
China implemented reforms in eight of the 10 areas the study monitors, said the report. Obtaining a company seal, construction permits, electricity connection, paying taxes, exporting and importing, and commercial litigation have all been made easier in the last year, it found, and protections for minority investors and creditors in insolvency cases have been enhanced.
The World Bank highlighted some key reforms in the report, including implementing a preferential corporate income tax rate for small enterprises, reducing the value-added tax rate for certain industries and enhancing the electronic filing and payment system. Other key reforms included simplifying import and export procedures by implementing advanced cargo declarations, upgrading port infrastructure, optimizing customs administration and publishing fee schedules.
China also unveiled a regulation on Oct 23, 2019, to further improve its business environment and further open up its economy. The regulation will offer market guarantees for companies investing or expanding their business in China. Equal treatment will be given to all market entities - whether foreign or domestic - by establishing basic institutional norms in the business environment, according to the new regulation.
More efforts to better the business environment
I. Ensuring level playing field
Equality is the keynote of China’s Foreign Investment Law, which is set to replace the existing three laws and serve as the basic law on foreign investment since Jan 1, 2020.
The new law introduces the system of pre-establishment of national treatment and a negative list, according to which sectors outside the list are fully open to foreign investment. What’s more, from policy supports to government procurement, and from stand-setting to fund-raising, the law makes it easier for foreign investors to compete in China on an equal footing.
In addition, the Chinese government also grants extra support for the use of land, sea, energy and planning for some major foreign investment projects in such sectors as new energy, advanced manufacturing, petrochemical engineering and electronic information.
II. Shrinking Negative List for foreign investment
When doing business in China, you must be aware of the Negative List, a list of industries or areas inaccessible or only partially open to investment. However, industries not on the list are legally available for investment from all market entities.
There are actually two negative lists, one for foreign investment applicable nationwide and the other for foreign investment in free trade zones. The negative list has continued to shrink with an increasing number of industries open to foreign investment. In June 2019, China updated the 2019 negative list for foreign investment and the 2019 negative list for foreign investment in free trade zones, with the number of items cut down to 40 and 37 respectively.
With the unified regulatory rules, many foreign investors can know which industries they can invest in and which they cannot, and are no longer subject to the willful regulatory moves of some local government agencies when doing business in China.
III. Enhancing protection of intellectual property rights (IPR)
China has so far established a comprehensive legal system governing IPR, including the Trademark Law, the Copyright Law, and the Patent Law, and has participated in almost all the major international IPR conventions.
China has refined its laws and regulations on IPR and improved its punitive damages system, greatly increasing the cost of IPR infringement. China has combined IPR protection with the building of the social credit system, with 38 ministries involved in the joint punishment of serious IPR infringements.
Besides accelerated rights authorization and confirmation, more convenient and efficient channels are being set up, allowing market entities to safeguard their rights at lower cost. China has set up 24 IPR protection centers and 20 IPR rapid reaction centers.