China Leapfrogs France in the World Bank’s annual rankings Ease of doing Business

China leapfrogged France in the World Bank’s annual rankings for ease of doing business, a shift that underscores the broader trend of developing economies catching up with their more advanced peers.

The world’s second-largest economy catapulted from 46 last year to 31, just ahead of France, which was unchanged at 32, according to the report released Wednesday in Washington. The Middle East showed new strength with Saudi Arabia, Jordan, Bahrain and Kuwait among the top 10 gainers. That most-improved group also included India, Pakistan and Nigeria, three of the most populous nations.

Doing business more easily is associated with higher levels of entrepreneurship, which supports better employment opportunities, higher government tax revenues and personal income gains, according to the report. Such outcomes could help lend needed support to the flagging global economy, which the International Monetary Fund projects will slow this year to 3%, the weakest since the financial crisis.

Removing obstacles to businesses can be a positive force for fostering economic expansion, though they’re among many of the factors that can affect outcomes, according to Rita Ramalho, a senior manager in the World Bank’s global indicators group and one of the main authors of the “Doing Business 2020” report.

“Improving in this can have positive impacts on growth,” she said in an interview. “We’ve done research on that and it does show that there are positive patterns and associations between having simpler, better business regulations and having higher growth rates, but it’s not a silver bullet.”

Some 115 of 190 economies made it easier to do business, though progress has been uneven: The top 50 include no Latin American economies and just two African nations. It takes entrepreneurs nearly six times longer on average to start a business in the in the bottom 50 economies than in the top 20.

New Zealand kept the top spot and Singapore held No. 2. Hong Kong moved up a notch to third, trading places with Denmark, while South Korea stayed in fifth. The U.S. moved up two spots to No. 6, knocking Georgia back to seventh, while the U.K., Norway and Sweden rounded out the top 10.

The best performers generally have “sound business regulation with a high degree of transparency,” and a common theme across the highest-scoring economies was widespread use of electronic systems, according to the report. All of the top 20 offer online business incorporation, electronic tax filing, and online property transfers.

The study evaluates how regulations enhance or constrain activity for smaller firms by measuring 10 variables, including the ease of starting a business, obtaining construction permits, getting electricity connections, access to credit, paying taxes, cross-border trade and enforcing contracts.

The report said a considerable disparity persists between low- and high-income economies for starting a business: Entrepreneurs in low-income economies typically spend the equivalent of 50% of income per capita to start a company, compared with just 4.2% for their counterparts in high-income economies.

“There’s ample room for developing economies to catch up with developed countries on most of the doing business indicators,” World Bank President David Malpass wrote in the report. “Performance in the area of legal rights, for example, remains weakest among low- and middle-income economies.”

The development lender credited leaders in both China and India for adopting the indicators outlined in the annual report as a core part of their reforms, according to the report.

Indian Prime Minister Narendra Modi’s years-long push to make life easier for companies showed more progress as the country’s ranking rose to 63 from 130 in 2016. The report cited a “remarkable reform effort” and said the changes are particularly commendable given the size of the economy.

China has made it easier to obtain construction permits, getting electricity, and resolve insolvency, reflecting government efforts to created working groups focused on each of the report’s indicators. “The use of ‘Doing Business’ as a benchmark aligns with the central government’s ambition to improve the competitiveness of the Chinese economy,” according to the report.

The improvement in the U.S. was based on changes in New York City and Los Angeles, the two largest cities. Both cut corporate taxes, while Los Angeles made starting a business easier by introducing more online filing and rolled out electronic filing that made enforcing contracts easier.

The six nations rounding out the bottom of the list remained in the same spots as last year: South Sudan, Libya, Yemen, Venezuela, Eritrea and, in last place, Somalia.

China Leapfrogs France in the World Bank’s annual rankings Ease of doing Business

Credit to Bloomberg

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