By Ma Xiaobai & Long Haibo

Research Report Vol.21 No.1, 2019

The World Bank’s Doing Business 2019 (hereinafter referred to as DB 2019) is a publication of major international influence that evaluates and ranks the efficiency and quality of business regulation in 190 economies worldwide. According to it, China carried out a record number of reforms in the past year to improve the business environment for small and medium-sized enterprises (SMEs), and it was therefore rated as one of the ten economies with the most notable improvements. Its international ranking in business environment climbed up from 78th to 46th, with particularly fast increase on two scores - “getting electricity” and “dealing with construction permits”. When evaluating the business environment in China, the World Bank chose Beijing and Shanghai as sample cities, and this report mainly summarizes Shanghai’s experience in perfecting the business environment and puts forth a few revelations on how to further improve it in China.

I. Achievements in Shanghai’s Perfection of Business Environment

In recent years, Shanghai, centered on national strategic goals, has consistently stepped up the reform to foster a stable, fair, transparent and predictable business environment and build the new open economic system at a faster pace. At the end of 2017, the CPC Shanghai Committee and Shanghai municipal government issued the Action Plan for Perfecting Business Environment and Accelerating the Building of An Open Economic System. It deepened the reform of “delegating power, strengthening management and improving services”, improved the business environment, and rolled out a series of new regulations and reform measures in the endeavor to make breakthroughs in important areas and form a law-based, internationalized and convenient business environment at an early date. In July 2018, Shanghai issued the Action Plan for Implementing Key National Measures for Further Opening-up and Accelerating the Building of An Open Economic System (“Shanghai’s 100 articles for further opening-up”), which made specific deployments for further opening up the city.

Shanghai’s score on Doing Business indicators - 2018 vs. 2017

In DB 2019, Shanghai’s most notable improvements in doing business fall on three indicators - “dealing with construction permits”, “getting electricity” and “trading across borders”, the scores for which are 21.83, 21.50 and 11.72 points higher than a year earlier respectively. The table below shows that its score on “starting a business” continues to top and its ranking leaps by 65 spots. The number of formalities needed to start a business is cut from seven to four and the handling period shortened from 22 to nine days. By the end of October 2018, there were 2,519,000 market entities of various kinds in Shanghai, including 2,039,000 enterprises, and the number of enterprises per 1,000 people was 81, the highest of all provincial administrative regions nationwide. The most notable improvement appears on “getting electricity” either in comparison with the previous year or in ranking, contributing a lot to bettering the overall business environment. After reform measures are taken, the number of formalities needed to get electricity is cut from five to three, the handling period shortened from 145 to 34 days, and the cost is zero for small and micro users. The score on “dealing with construction permits” increases considerably from a year ago, but the ranking implies much room for progress. Shanghai paid close attention to private investment projects on the municipal level, and simplified the approving procedures for construction permit to the largest extent. The number of post-reform formalities for dealing with construction permit was cut from 23 to 19, handling period shortened from 279 to 100 workdays, and the cost is lowered from nearly RMB 200,000 to RMB 70,000.

II. Consistently Deepen Reform, Focusing on key Doing Business Indicators

China’s quick rise in the international ranking of business environment is attributed to Beijing and Shanghai’s unprecedented reforms in a spate of areas. Shanghai made 2018 the “Year of Business Environment Reform”. With the pilot free trade zone as an entry point, it actively carried out improvement action plans on such key indicators as “starting a business”, “dealing with construction permits”, “getting electricity” and “trading across borders”, and launched institutional innovations in investment, trade and finance. The business environment in Shanghai is on the mend in general. It’s easier for enterprises to get things done and institutional transaction cost keeps falling. In the meantime, based on the China International Import Expo (CIIE), Shanghai proactively adopted the highest standards in the world, creating favorable conditions for further improving the business environment.

1. “One counter” and one permit for starting a business. At the end of February 2018, the Shanghai Administration for Industry & Commerce, Shanghai Public Security Bureau, Shanghai National Tax Bureau and Shanghai Local Tax Bureau jointly issued the Opinions on Accelerating Procedural Reform for Corporate Registration and Promoting “One-Counter Services” for Starting Businesses. The document, by promoting integrated handling of industry & commerce, public security and tax formalities, aimed to enable new enterprises in the city to get the license in three days and start operation in five days as long as all application materials are ready. To be more specific, Shanghai deepened the reform to “streamline procedures, shorten handling period and create convenience for enterprises”.

First, Shanghai opens the “one-counter-service” platform. This platform integrates application acceptance, review, approval and feedback, realizes interaction among industry & commerce, public security and tax organs in enterprise-related data, and strongly facilitates each department in simplifying the review and expediting approval internally. The traditional process, whereby the applicant has to submit the materials to each department one by one, is replaced by the new one whereby the applicant, through the “one-counter-service” platform, only needs to fill in one form and submit the data once. Different departments will collect the data simultaneously and share information. Matters concerning business license, public security registration and taxation are accepted at one counter, automatically distributed to each department backstage and handled in parallel, and the results are shared in a real-time manner. The platform also offers such services as bank appointment for account opening, and self-service of social security for employees.

Second, it streamlines procedures and shortens handling period. Shanghai sorted out the original procedures and revoked some of them. For instance, two steps - pre-approval of corporate name by industry & commerce and registration of company formation - are combined into one, and the registration of labor use and of social security contribution at the human resources and social security department are combined into the registration of employment & social security contribution. The industry & commerce department checks all the materials for business startup to decide whether to register the startup or not. Meanwhile, for procedures that must be kept, the internal formalities are streamlined and working efficiency raised. For example, the time needed by industry & commerce to issue a business license is shortened from seven to three days, and the time needed by the tax department to issue an invoice is shortened from 10 days to one day.

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