Improving City Competitiveness
through the Investment Climate:
Ranking 23 Chinese Cities
David Dollar
Anqing Shi
Shuilin Wang
Lixin Colin Xu
December , 2003
This report is based on an investment climate survey conducted in 2002 in five Chinese cities (Beijing, Chengdu, Guangzhou, Shanghai, and Tianjin), and a follow-up survey conducted in 2003 in 18 cities. We gratefully acknowledge financial support from the United Kingdom’s Department for International Development (DFID), World Bank Research Committee and the Multi-donor Funded Knowledge for Change Program. A grant from DFID supported the collaboration of the Enterprise Survey rganization(ESO) in this survey and fellowships for two ESO staff, Mr. Yang Yumin and Ms. Li Hui, to visit Washington, DC, for analysis and preparation of an earlier report. We are especially grateful to Director Song Yuezhen, Deputy Director Wang Wenying, and Deputy Director Lei Pingjing. Director Lei has been the project manager for both surveys, and worked with World Bank staff in piloting and training. The paper has benefited from useful comments and help from Deepak Bhattasali, Milan Brahmbhatt, Philip Keefer, Axel Peuker, Andrew Stone, Kong-Yam Tan, and Albert Zeufack. This project is part of a larger effort in the World Bank Group to help countries assess their investment climates and to identify reforms that will lead to higher productivity, more efficient investment, and ultimately more job creation and growth.
Chapter 1. Investment Climate Matters
During the last decade, major developing countries including China have begun to integrate much more with the global economy. The countries that are aggressively integrating have grown significantly faster than those that are not. In the 1990s, the more rapidly globalizing developing countries (measured in terms of increased trade participation) grew at 5.0 percent per year, while the rest of the developing world posted negative growth of 1.1 percent.1 Among the more aggressive globalizers were Brazil, China, Mexico, Philippines, Thailand, and India.
That globalizing developing countries are doing well on average is good news. But these averages disguise considerable variation in performance within this group. China has done spectacularly well, and is the unchallenged leader of the pack. The country has doubled its ratio of trade to GDP over the past two decades (to 41 percent of GDP in 1999), and has had per capita GDP growth of nearly 8 percent on average during 1990-99. Malaysia was another winner: in spite of the temporary income compression due to the Asian crisis, it could still enjoy per capita GDP growth of 3.8 percent during the 1990s. Again, despite the crisis, Thailand’s per capita GDP growth in the 1990s averaged 3.8 percent. However, the per capita GDP growth of another relatively aggressive globalizer, Brazil, has only been around 1 percent for 1990-99; and growth in the Philippines was only 0.4 percent. India, with per capita GDP growth of 3.3 percent during 1990-99 is in the middle of the pack (figure 1.1).
The implication of these variations is striking. Such differences in growth rates sustained for one or two decades make a huge difference in living standards and the extent of poverty. While in 1990 China and India had comparable levels of GDP per capita (approximately $1,400 measured at purchasing power parity), in the following decade India’s per capita income nearly doubled, but China’s nearly tripled. Thus, today, China’s per capita income is about 50 percent higher than that of India. Together with its faster growth, China has also had significantly faster poverty reduction (figure 1.2).
1 During the same period, the rich countries grew at about
2 percent per capita.
