Business Indicators
| Last Updated: December 2009 |
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China |
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Business Indicators Summary
With an overall score of 5.32/12, China is below standard on the economic, legal, and political indicators that make up our Business Index. China is an economy dominated by state-owned enterprises, with market-oriented reforms gaining momentum. Foreign investment in China is restricted to specific sectors, and the regulatory system is not transparent, laws are inconsistently enforced, and there are protectionist industrial policies that favor local companies. Progress has been achieved in addressing shortcomings in the property rights framework; however, the Chinese Government has yet to implement effective enforcement measures to deter widespread infringement of intellectual property rights. Corruption still represents an obstacle to investment in China, particularly in sectors where government approval is required. Rooting out corrupt practices is hindered by the fact that all investigations are ultimately controlled by the Communist Party and the absence of independent reporting on investigation activity.
Business Indicators
- Economic Model
- Forex Regulations
- Foreign Investment Law
- Trade Regulation
- Tax Regime
- Tax Rates
- Bankruptcy Indicators
- International Dispute Settlement
- Political Environment
- Political Stability
- Corruption
- Adherence to global labor standards
Exchange ControlsNo
According to J. Gwartney et al., compilers of the 2009 Economic Freedom of the World (EFW) Annual Report, China scores 10.0 for the factor "Freedom to Own Foreign Currency." The EFW report assigns this score where foreign currency accounts are permissible both domestically and abroad, without restriction. The Heritage Foundation's 2009 Index of Economic Freedom reports that foreigners may have access to foreign exchange in order to repatriate profits or to carry other current account transactions, but adds that capital accounts transactions are highly regulated. The 2009 Country Commercial Guide (CCG) by the U.S. Department of Commerce reports that foreign exchange regulations have been gradually loosened for foreign-invested firms. Because of China's recent experience of large trade surpluses and capital inflows, the authorities have begun tightening restrictions as they apply to capital inflows and loosening them with regard to outflows. The exchange rate regime has been liberalized, as has the operation of exchange rate markets. Foreign-invested firms must apply to the State Administration of Foreign Exchange in order to open and maintain foreign exchange accounts. The Exchange sets limits on foreign exchange amounts allowed, and require that all deposits in excess of the limit be converted to local currency. There is a twice-yearly reporting requirement imposed on the foreign exchange balance of foreign firms.
Sources
Gwartney, J., et al., "Economic Freedom of the World: 2009 Annual Report," 2009. Available from Frazer Institute website. Accessed on October 23, 2009. (Gwartney et al. 2009)
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Heritage Foundation, "2009 Index of Economic Freedom: China," 2009. Available from Heritage Foundation website. Accessed on October 23, 2009. (HF 2009)
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U.S. Department of Commerce, "Doing Business in China: A Country Commercial Guide," 2009. Available from U.S. & Foreign Commercial Service and U.S. Department of State website. Accessed on October 24, 2009. (U.S. DoC 2009)
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