Regulation and Change in China and Australia – Starting a Business Vivienne Bath Senior Lecturer and Director of the Centre for Asian and Pacific Law Faculty of Law University of Sydney

Starting a business - China Rapid growth of the private sector Rapid growth of the private sector Market changes Market changes Rapid rate of legal and regulatory reform Rapid rate of legal and regulatory reform Company Law 1994; revised 2005 Company Law 1994; revised 2005 Reforms of state-owned sector Reforms of state-owned sector Administrative reforms Administrative reforms

Reform and efficiency How can we assess the likely effect of legal and regulatory reform? How can we assess the likely effect of legal and regulatory reform? Can we accurately assess whether it has achieved the desired objectives? Can we accurately assess whether it has achieved the desired objectives? What are the desired objectives? What are the desired objectives? Can (and should) regulations be measured? Why? Can (and should) regulations be measured? Why? If so, are the World Bank measures useful? If so, are the World Bank measures useful?

Ranking data Ease of Doing BusinessStarting a Business Economy RAN K Procedur e s ( n u m b e r)Time (days) Cost (% of incom e per capita ) Min. capital (% of incom e per capita ) Ease of starti ng a busin ess (perc entile ) Australia %0%0.02 China %213%0.60 China %0%0.02 Australia %213%0.59

Rankings Employing Workers Difficulty of Hiring Index Rigidity of Hours Index Difficulty of Firing Index Firing costs (weeks of wages) Ease of employi ng worker s (percen tile) Australia China China Australia

Starting a business in China What entities are available? What entities are available? History – state owned enterprises History – state owned enterprises Growth of the foreign investment enterprise Growth of the foreign investment enterprise Development of the Chinese private sector Development of the Chinese private sector Entities available Entities available What is the legal basis for establishing a business? What is the legal basis for establishing a business? Legal regime for state-owned enterprises (including Company Law) Legal regime for state-owned enterprises (including Company Law) Foreign investment legislation Foreign investment legislation Company law of the PRC and regulations issued by the State Administration for Industry and Commerce Company law of the PRC and regulations issued by the State Administration for Industry and Commerce

Starting a business How easy is it to set up a company? How easy is it to set up a company? World Bank criteria World Bank criteria Time Time Number of procedures Number of procedures Cost Cost Amount of required registered capital Amount of required registered capital

Starting a business in China Other factors relevant to setting up a business Other factors relevant to setting up a business Is the law easy to follow? Is the law easy to follow? Is the relevant information accessible? Is the relevant information accessible? Are government officials helpful? Are government officials helpful? Is professional advice necessary? Is professional advice necessary?

Starting a business How does the Chinese system compare to other systems – such as Australia? How does the Chinese system compare to other systems – such as Australia? World Bank criteria World Bank criteria Is the law easy to follow? Is the law easy to follow? Is the relevant information accessible? Is the relevant information accessible? Are government officials helpful? Are government officials helpful? Is professional advice necessary? Is professional advice necessary?

Red tape and reform Purposes of regulatory reform Purposes of regulatory reform To facilitate business and investment To facilitate business and investment To achieve a social purpose or benefit To achieve a social purpose or benefit Not limited to reducing procedures – reforms to reduce corruption and improve governance equally important Not limited to reducing procedures – reforms to reduce corruption and improve governance equally important

Regulatory issues Australia: tax; triple levels of regulation and licensing; overall proliferation of regulatory requirements Australia: tax; triple levels of regulation and licensing; overall proliferation of regulatory requirements China: multiple levels of legislation; unresponsive public service; imposition of extra fees and charges; lack of transparency; corruption China: multiple levels of legislation; unresponsive public service; imposition of extra fees and charges; lack of transparency; corruption

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

Regulatory reforms - China Administrative Licensing law 2003; new regulations on disclosure of information by government agencies Administrative Licensing law 2003; new regulations on disclosure of information by government agencies Eliminates redundant licensing requirements Eliminates redundant licensing requirements Restricts imposition of new licensing requirements Restricts imposition of new licensing requirements Controls implementation of licences – transparency; even-handedness; publication of decisions; availability of information; no extra charges Controls implementation of licences – transparency; even-handedness; publication of decisions; availability of information; no extra charges

Regulatory reforms - China Regulations on Open Government Information Regulations on Open Government Information Require disclosure of information by government agencies Require disclosure of information by government agencies Citizens may require agencies to provide information Citizens may require agencies to provide information Exceptions for state secrets Exceptions for state secrets Implementation and enforcement methods unclear Implementation and enforcement methods unclear