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
Market changes
Rapid rate of legal and
regulatory reform
Company Law 1994; revised 2005
 Reforms of state-owned sector
 Administrative reforms

Reform and efficiency





How can we assess the likely effect
of legal and regulatory reform?
Can we accurately assess whether it
has achieved the desired objectives?
What are the desired objectives?
Can (and should) regulations be
measured? Why?
If so, are the World Bank measures
useful?
Ranking data
Ease of Doing Business
RAN
Economy
K
Starting a Business
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
8
2
2
2%
0%
0.02
China
93
13
35
9%
213%
0.60
China
67
2
2
2%
0%
0.02
13
13
35
9%
213%
0.59
Australia
Rankings
Employing Workers
Difficulty of
Hiring
Index
Australia
Rigidity of
Hours
Index
Difficulty of
Firing
Index
Firing costs
(weeks
of
wages)
Ease of
employi
ng
worker
s
(percen
tile)
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 China

What entities are available?





History – state owned enterprises
Growth of the foreign investment enterprise
Development of the Chinese private sector
Entities available
What is the legal basis for establishing a
business?



Legal regime for state-owned enterprises
(including Company Law)
Foreign investment legislation
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?
World Bank criteria
Time
 Number of procedures
 Cost
 Amount of required registered
capital

Starting a business in China

Other factors relevant to setting
up a business
Is the law easy to follow?
 Is the relevant information
accessible?
 Are government officials helpful?
 Is professional advice necessary?

Starting a business

How does the Chinese system
compare to other systems –
such as Australia?
World Bank criteria
 Is the law easy to follow?
 Is the relevant information
accessible?
 Are government officials helpful?
 Is professional advice necessary?

Red tape and reform

Purposes of regulatory reform
To facilitate business and
investment
 To achieve a social purpose or
benefit
 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
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
Regulatory reforms - China

Administrative Licensing law 2003;
new regulations on disclosure of
information by government agencies



Eliminates redundant licensing
requirements
Restricts imposition of new licensing
requirements
Controls implementation of licences –
transparency; even-handedness;
publication of decisions; availability of
information; no extra charges
Regulatory reforms - China





Regulations on Open Government
Information
Require disclosure of information by
government agencies
Citizens may require agencies to
provide information
Exceptions for state secrets
Implementation and enforcement
methods unclear