Investment climate in 120 Chinese cities:

preliminary results from a survey by NBS and World Bank

David Dollar, World Bank, May 2006

Six regions involved in investment climate survey

Survey design

• Covers all provincial capitals plus largest other cities in the province

• 100 firms from each of 116 cities, 200 firms from mega-cities (Beijing, Tianjin, Shanghai, Chongqing)

• Survey universe: for each city, top 10 manufacturing industries in terms of sales

• Divide firms with 10+ workers into top, middle, and bottom third in terms of sales; randomly choose from each group, 33, 33, and 34 firms, respectively

Distribution of sample firmsby ownership

Majority state owned8%

Foreign invested28%

Domestic non-state64%

Distribution of sample firms’ assets by ownership

Majority state owned32%

Foreign invested27%

Domestic non-state41%

Rate of return on capital

7%

19%

22%

State-owned enterprises

Private domesticenterprises

Foreignenterprises

State enterprise share of industry output

0 10 20 30 40 50 60 70 80Percent

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

Private rate of return by region

0 5 10 15 20 25 30 35 40Percent

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

Customs clearance (exports)

0 2.5 5 7.5 10

Days

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

Output lost to power outages

0 1 2 3 4 5 6

Percent

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

Days dealing with government bureaucracy

0 10 20 30 40 50 60 70 80

Days

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

Surplus labor

0 1 2 3 4 5

Percent

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

Firms making informal payments to secure bank loan

Southeast

Bohai cluster

Northeast

Southwest

Center

Northwest

0 2 4 6 8 10

Percent

Lagging regions: productivity gains from achieving Southeast investment climate

0 60 80 100

Northeast

Southwest

Center

Northwest

Percent

Policy: city level

• Divest state enterprises

• Simplify business registration, procedures, red tape

• Improve logistics (customs, transport services)