In the World Bank Group's Doing Business 2020 study, an annual publication that evaluates countries' business environments for small and medium-sized enterprises (SMEs), China for a second year found itself ranked among the top 10 countries for a most-improved business climate. China's ranking climbed to 31st place in terms of ease of doing business, up from 46th a year earlier and 78th in 2017.
China's Regulation on Optimizing the Business Environment states that China will follow the principle of being market-oriented, law-based, and internationalized to optimize the business environment. It stipulates that the business environment must be able to meet the demands of market players and requires the departments concerned to prioritize clarification and simplification of government functions in order to innovate systems and procedures, facilitate joint action, improve the legal system, and benchmark international standards. The goal is to create a fairer, more stable, transparent, and predictable business environment for all market entities.
Measures taken to optimize the business environment
Expand access for foreign investment
China continues to expand market access, simplify procedures for handling administrative licensing, and implement a nationwide negative list system for market access. Any non-Chinese company may, in accordance with the law, engage in fields not included in the negative list on an equal basis with competitors from countries around the world, including China.
The negative list for foreign investment access, revised in 2020, further lifts restrictions on foreign investment access in various fields, including financial services, infrastructure, commercial vehicle manufacturing, radioactive materials smelting and processing, nuclear fuel production, and the crop seed industry. In addition, pilot free trade zones are rolling out more pilot projects for further opening up. Foreign investors are now allowed to invest, for example, in traditional Chinese medicine decoction and establish wholly foreign-owned school year-length vocational training institutions, thus creating a more open, convenient and fair investment environment and greater cooperation in the global industrial chain.
Reduce restrictions on business operations
Since December 1, 2019, China has been "separating permits from business licenses" in its pilot free trade zones. This means that most enterprise-related business licensing items can now be arranged at the central government level with a minimum of fuss and bother for companies wishing to operate in the zones. Once the program matures there, it will be launched nationwide.
The step of "separating permits from business licenses" makes it easier for enterprises and entrepreneurs to enter their markets and carry out business operations. The approval procedures for all enterprise-related business licensing now feature three simple steps: direct cancellation of review and approval, simplified and consistent record-filing, and a notification and commitment system, and are supported by improvements of services when the businesses are up and operating.
Ease personal qualifications and simplify investment procedures
To make it easier for foreign nationals to work in China regions throughout the country have relaxed restrictions on the age, educational level, and work experience of urgently needed talents who have innovative and entrepreneurial, professional, technical and other skills that meet the needs of local economic development.
Approval procedures for land use for foreign-invested projects have also been simplified to ensure streamlined administration and optimized government services for planned land use. Efforts are made to accelerate implementation of foreign-invested projects, site selection is combined with the preliminary approval process for land use, land planning permission and land use approval processes are merged, and approval procedures are optimized into an all-in-one acceptance and information sharing system using simplified application documents.
China has reduced costs for the cross-border use of funds. Foreign-invested enterprises are encouraged to expand cross-border use of the renminbi, the scope for pilot programs in facilitating capital account income payments has been expanded, and reform of the registration system for foreign debt issuance by enterprises has been promoted to allow foreign-invested enterprises to independently select the way of borrowing foreign debt to reduce financing costs. Certain foreign-invested enterprises are allowed to engage in equity investment in China with capital in accordance with the law, so long as they do not violate the effective Special Administrative Measures (Negative List) for the Access of Foreign Investment and the projects they invest in are real and comply with laws and regulations.
Promotion of fair competition
Documents required for foreign investment have been made clearer and more thorough to ensure that foreign-invested enterprises meet the standards set by the law and that foreign-invested enterprises can participate in government procurement through fair competition in accordance with the law.
Regulation of fee collection
China has done a lot of work to cut taxes and fees. It has implemented various national tax and fee cut policies to benefit market entities by reducing their operating costs.
Since 2013, the number of administrative charges levied by the central government has been reduced by 73 percent, and 30 percent of government-managed funds and fees have been cut. In 2019, substantial tax and fee cuts were implemented to further lower the value added tax rates in manufacturing, transportation and other industries. Meanwhile, qualifications for preferential policies on corporate income tax relief for SMEs were relaxed and the relief was scaled up. Charges and fees levied on businesses by government agencies, commercial banks and trade associations or chambers of commerce, as well as by intermediary institutions, were all reviewed to reduce the burden on enterprises.
Through the above measures China has opened its markets to foreign participants, and will continue to welcome them for mutual benefit and global prosperity.