Regulation and Change in Regulation and Change in China and Australia – Starting China and Australia – Starting

a Businessa Business

Vivienne BathVivienne BathSenior Lecturer and Director of the Centre for Asian Senior Lecturer and Director of the Centre for Asian

and Pacific Lawand Pacific LawFaculty of Law University of SydneyFaculty of Law University of Sydney

Starting a business - ChinaStarting a business - China

Rapid growth of the private Rapid growth of the private sectorsector

Market changesMarket changes Rapid rate of legal and Rapid rate of legal and

regulatory reformregulatory reform Company Law 1994; revised 2005Company Law 1994; revised 2005 Reforms of state-owned sectorReforms of state-owned sector Administrative reformsAdministrative reforms

Reform and efficiencyReform and efficiency

How can we assess the likely effect How can we assess the likely effect of legal and regulatory reform?of legal and regulatory reform?

Can we accurately assess whether it Can we accurately assess whether it has achieved the desired objectives?has achieved the desired objectives?

What are the desired objectives?What are the desired objectives? Can (and should) regulations be Can (and should) regulations be

measured? Why?measured? Why? If so, are the World Bank measures If so, are the World Bank measures

useful? useful?

Ranking dataRanking data

Ease of Doing Business Starting a Business

EconomyRAN

K

Procedures (number) Time (days)

Cost (% of income per capita

)

Min. capital (% of income per capita

)

Ease of starting a business

(percentile

)

Australia

8 2 2 2% 0% 0.02

China 93 13 35 9% 213% 0.60

China 67 2 2 2% 0% 0.02

Australia

13 13 35 9% 213% 0.59

RankingsRankings

Employing Workers

Difficulty of Hiring Index

Rigidity of Hours Index

Difficulty of Firing Index

Firing costs (weeks

of wages)

Ease of employi

ng workers (percen

tile)

Australia 8 0.00 0 10 4 0.059

China 93 11.11 20 40 91 0.415

China 78 0.00 0 10 4 0.059

Australia 11 11.11 20 40 91 0.415

Starting a business in ChinaStarting a business in China

What entities are available?What entities are available? History – state owned enterprisesHistory – state owned enterprises Growth of the foreign investment enterpriseGrowth of the foreign investment enterprise Development of the Chinese private sectorDevelopment of the Chinese private sector Entities availableEntities available

What is the legal basis for establishing a What is the legal basis for establishing a business?business? Legal regime for state-owned enterprises Legal regime for state-owned enterprises

(including Company Law)(including Company Law) Foreign investment legislationForeign investment legislation Company law of the PRC and regulations issued Company law of the PRC and regulations issued

by the State Administration for Industry and by the State Administration for Industry and CommerceCommerce

Starting a businessStarting a business

How easy is it to set up a How easy is it to set up a company?company?

World Bank criteriaWorld Bank criteria TimeTime Number of proceduresNumber of procedures CostCost Amount of required registered Amount of required registered

capitalcapital

Starting a business in ChinaStarting a business in China

Other factors relevant to setting Other factors relevant to setting up a businessup a business Is the law easy to follow?Is the law easy to follow? Is the relevant information Is the relevant information

accessible?accessible? Are government officials helpful?Are government officials helpful? Is professional advice necessary?Is professional advice necessary?

Starting a businessStarting a business

How does the Chinese system How does the Chinese system compare to other systems – compare to other systems – such as Australia?such as Australia? World Bank criteriaWorld Bank criteria Is the law easy to follow?Is the law easy to follow? Is the relevant information Is the relevant information

accessible?accessible? Are government officials helpful?Are government officials helpful? Is professional advice necessary?Is professional advice necessary?

Red tape and reformRed tape and reform

Purposes of regulatory reformPurposes of regulatory reform To facilitate business and To facilitate business and

investmentinvestment To achieve a social purpose or To achieve a social purpose or

benefitbenefit Not limited to reducing procedures Not limited to reducing procedures

– reforms to reduce corruption and – reforms to reduce corruption and improve governance equally improve governance equally importantimportant

Regulatory issuesRegulatory issues

Australia: tax; triple levels of Australia: tax; triple levels of regulation and licensing; overall regulation and licensing; overall proliferation of regulatory proliferation of regulatory requirementsrequirements

China: multiple levels of China: multiple levels of legislation; unresponsive public legislation; unresponsive public service; imposition of extra fees service; imposition of extra fees and charges; lack of and charges; lack of transparency; corruptiontransparency; corruption

Regulatory reforms - ChinaRegulatory reforms - China

Company Law 2005: reduction Company Law 2005: reduction of amount of required registered of amount of required registered capital; change in requirement capital; change in requirement of payment up front; increased of payment up front; increased rights for minority shareholders; rights for minority shareholders; improvement of provisions improvement of provisions relating to corporate governance relating to corporate governance and shareholder rightsand shareholder rights

Regulatory reforms - ChinaRegulatory reforms - China

Administrative Licensing law 2003; Administrative Licensing law 2003; new regulations on disclosure of new regulations on disclosure of information by government agenciesinformation by government agencies Eliminates redundant licensing Eliminates redundant licensing

requirementsrequirements Restricts imposition of new licensing Restricts imposition of new licensing

requirementsrequirements Controls implementation of licences – Controls implementation of licences –

transparency; even-handedness; transparency; even-handedness; publication of decisions; availability of publication of decisions; availability of information; no extra chargesinformation; no extra charges

Regulatory reforms - ChinaRegulatory reforms - China

Regulations on Open Government Regulations on Open Government InformationInformation

Require disclosure of information by Require disclosure of information by government agenciesgovernment agencies

Citizens may require agencies to Citizens may require agencies to provide informationprovide information

Exceptions for state secretsExceptions for state secrets Implementation and enforcement Implementation and enforcement

methods unclearmethods unclear