Boosting Economic Growth with a Better Business Environment

by Liu Ying

Since Chinas historic reform and opening up began in 1978， foreign-invested enterprises have played an important role in driving technological progress， promoting economic growth and creating more jobs in China. During these 40 years， Chinas high-speed and healthy economic development has also offered foreign-invested enterprises gorgeous returns， and the country has been one of the most attractive destinations for foreign direct investment （FDI） in the world.

Improving the business environment is a key step to attract and stabilize FDI. And Chinas high-quality economic development also requires a sound business environment.

Widely Recognized Efforts

A good business environment is conducive to lowering transaction costs， improving operating efficiency and attracting FDI. According to the World Bank， if the time it takes for investors to start a business is cut by 10 days， it would increase investment by 0.3 percent and enhance GDP growth by 0.36 percent.

Since it began the reform and opening up in 1978， Chinas consistent efforts to improve its business environment have been recognized by the world at large. Since the inception of the World Bank flagship publication Doing Business in 2003， China has made notable improvements to its business environment. Chinas global ranking on ease of doing business measured by Doing Business annual reports advanced from 108th at first to 96th by 2013 and then up to 46th in 2018 as the country finally broke into the top 50. This evidences that the countrys business environment has undergone qualitative changes and realized notable improvements.

Improvements in Chinas business environment have enabled substantial growth of foreign-invested enterprises. Global cross-border investment dropped by 41 percent in the first half of 2018， but foreign investments have increased in China. In 2018， foreign investment projects in China exceeding 10 billion yuan（US$1.44 billion） each included German chemical giant BASFs Verbund chemical production site in Guangdong Province as its largest investment project to date， BMWs global production base for new energy vehicles in Shenyang City， and Teslas first-ever wholly owned super factory outside the United States， which is located in Shanghai.

Accelerated Optimization

Since China began to implement its reform and opening-up policy， the gradual improvements to the countrys market economy enabled foreign investors to enjoy increasingly equal treatment to domestic investors. In 1979， Law of the Peoples Republic of China on Chinese-Foreign Equity Joint Ventures was passed. As Chinas first legal document dealing with foreign investment， this law secured protections for foreign investment in China. In 1986， to address long-standing problems and reduce administrative intervention， China promulgated Provisions of the State Council for the Encouragement of Foreign Investment and 22 rules for its implementation. Beginning in 1995， to better examine and approve foreign investment projects in China， the country classified foreign investments into the four categories of encouraged， permitted， restricted and prohibited projects. And classifications could be altered and revised based on social and economic development. From then on， Chinas guidance on foreign investments became routine.

Since China joined the World Trade Organization （WTO） in 2001， it has been actively fulfilling its WTO commitments to provide a better internal and external environment for foreign-invested enterprises operating in China. Since the 18th National Congress of the Communist Party of China（CPC） in 2012， reform on Chinas attraction and usage of FDI has been driven to a deeper level. China has been committed to implementing a management system based on pre-establishment national treatment and a negative list and broadening its market access with an eye on advancing its opening up to a wider scale and higher level.

In recent years， China has attached great importance to reforms to streamline administration， delegate powers and improve regulation and services. It fully opened its manufacturing sector， eased market access to the service industry and opened some fields such as finance and insurance to unprecedented levels.

The improvement of Chinas business environment and the countrys reforms to streamline administration， delegate powers， and improve regulation and services cover two key realms. First， much less paperwork is required to streamline administration. In 2019， a nationwide reform to simplify the approval system for construction projects will be carried out in China. A unified procedure will be established. This reform is expected to stimulate the dynamics of market players， enhance the performance of foreign investment and foster high-quality growth of the Chinese economy. Additionally， the reform of the production license system for industrial products has been driven to a deeper level in recent years， which has effectively reduced institutional transaction costs and unlocked market vitality. Second， governments at all levels have taken positive actions and drawn clear roadmaps and timetables to eliminate unreasonable barriers and restrictions. A plethora of measures have been taken to improve Chinas business environment.

By improving its business environment， China will better merge its high administrative efficiency with its mature infrastructure facilities， rich human resources， and huge market with great potential. In the process， not only will China create more advantages in terms of attracting FDI， improving trade structure， seizing high-quality development and optimizing the global industrial chain， but at the same time， it will also create benefits that the whole world will enjoy.