Workers at a medium-sized textile company in Nantong, Jiangsu Province. Many small and medium-sized enterprises are increasingly facing challenges such as red tape and lack of capital. [China Daily]

The Chinese mainland has been one of the 15 most-improved economies in the past five years for local companies to conduct business, the latest report released by the International Finance Corporation (IFC) and the World Bank (WB) on Thursday showed.

Fourteen regulatory changes have been introduced to make it easier to conduct business on the mainland, according to the report Doing Business 2011: Making a Difference for Entrepreneurs.

But the mainland's overall ranking in the report slid to 79th from 78th because of the relatively better improvements in other economies, said Karim Belayachi, co-author of the report.

"China has made improvements in the indicator of paying taxes. But many countries are reforming and in East Asia and the Pacific area 75 percent of the countries have improved," he said.

The report analyzes regulations that apply to an economy's businesses during their life circle, including start-up and operations, trading across borders, paying taxes, and closing a business. It does not measure security, macroeconomic stability, corruption, the skill levels, or the strength of financial systems.

The results were mainly based on nine indicators - starting a business, paying taxes, trading across borders, registering property, dealing with construction permits, getting credit, closing a business, enforcing contracts and protecting investors.

From June 2009 to June 2010, the mainland made it easier for companies to pay taxes by clarifying the calculation of taxable income for corporate income tax purposes. The time for tax compliance was also cut by more than 20 percent from 504 to 398 hours per year, said Neil Gregory, acting director of Global Indicators and Analysis, the WB and IFC.

The mainland unified criteria for corporate income tax deduction and shifted from a production-oriented value-added system to a consumption-oriented one, the IFC said in the report.

Belayachi said the process of starting a business in the mainland has some room for improvement.

"Countries around the world are establishing one-stop shops in which they are taking away burdens on potential owners of small and medium-sized enterprises so that they can set up companies more easily," he said.

The mainland ranked 151th globally in terms of the ease of starting a business, with 14 procedures for an entrepreneur to undergo with government agencies, 4.5 percent of income per capita as cost and 118.3 percent of income per capita as minimum capital.

It ranked 15th in enforcing contracts, 38th in trading across borders, 114th in paying taxes and 181st for dealing with construction permits.

Singapore, Hong Kong and New Zealand lead the world in the ease of doing business for local firms, the report said.

Globally, conducting business remains easiest in the high-income economies of the Organization for Economic Cooperation and Development.

For the first time in the eight years of the Doing Business reports, economies in East Asia and the Pacific were among the most active in making it easier for local firms to do business, the report said.

Entrepreneurs in Sub-Saharan Africa and South Asia have it hardest and property protection was weakest across the nine areas of business regulations that were considered in this year's ranking, the report said.

(China Daily November 5, 2010)