Business Environment: China

Résumé du document

Despite a slowdown amidst the global economic crisis of 2008-2009, China remains the world's fastest growing economy. Real GDP grew at 8.7% in 2009, mainly owing to the government's huge stimulus program. A stronger growth of 10.0% is expected for 2010 as a result of a recovery in the property market and a rebound of domestic spending. As exports slowed down, the country's current account surplus declined from 9.8% of total GDP in 2008 to 7.6% of total GDP in 2009.

China's exceptional economic growth as well as its impressive growth potential continues to attract a large number of investors to the country. The Chinese government generally welcomes foreign investment and implements a wide range of incentive policies to foreign businesses. However, investors continue to complain about a complicated business environment with a lack of transparency, inconsistent law enforcement as well as protective policies for local firms. In 2009, the Chinese government increased its support for the export sector, imposed restrictions on government procurement from foreign companies, used its new anti-monopoly law to block foreign investment and
came under pressure from trade partners for its "dumping" practices. Despite these challenges, China's economy remains competitive and the country is one of the main destinations for foreign capital investment. In 2008, foreign direct investment (FDI) inflows reached US$109 billion and recorded a period growth of 41.1% in real terms between 2003 and 2008.

Extraits

[...] Due to a lack of adequate credit information on borrowers, personal connections remain an important source of getting credit in China. The slowdown of the economy since 2008 has also impacted on credit availability in China and the government has since then announced measures to enhance the access of SMEs to bank credit. The process of closing a business in China takes 1.7 years for completion, costs of the estate with a recovery rate of 35.3 cents on the US dollar, higher than in India ( 15.1 cents) but lower than in Mexico ( 64.2 cents). [...]

[...] China ranked 29th out of 133 countries in the World Economic Forum's global competitive index in 2009-2010, outperforming other emerging economies such as India (49th) and Russia (63rd). This represents an improvement of one place compared to the previous year due to the country's improved capacity to innovate. While China offers a stable political environment to do business in, corruption remains a persistent problem. In 2009, it ranked 79th out of 180 countries in Transparency International's corruption perceptions index, ranking much higher than Japan (17th) but lower than India (84th). [...]

[...] Foreign investors have raised their concerns about the difficulty in finding skilled staff. In order to cope with skills shortage problem, the government has implemented measures to attract foreign talent as well as Chinese living overseas to come to China to work. Between 2004 and 2009, government expenditure on education recorded a period growth of in real terms. The proportion of economically active population to total population has been stable in China since 2004. As a result of the economic slowdown, the rate of urban unemployment rose from in 2008 to in 2009. [...]

[...] The taxes included are profit or corporate income tax, social security contributions and other labour taxes paid by the employer, property taxes, turnover taxes and other small taxes (such as municipal fees and vehicle and fuel taxes). Data for each year covers the period June-May of previous year. w Since January 1st China has applied a unified corporate income tax rate of on both Chinese and foreign firms, while small-scale companies can enjoy a tax rate of in certain cases. The government offers a threeyear tax exemption for environmental protection, water and energy efficiency projects. [...]

[...] The new tax law is one of the measures to improve tax governance and to level the playing field between local and foreign firms in China. With a significant informal sector in the economy and an inefficient tax collection system, tax evasion is a persistent problem in China, causing losses to the country's tax revenues. China's tax authority, the State Administration of Taxation, has therefore introduced various anti-tax avoidance measures. In 2009, the standard value added tax (VAT) rate stood at There is a reduced VAT rate of being applied to certain goods including agricultural products and books. [...]