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Getting Credit in China: Legal Rights and Credit InformationFirms consistently rate access to credit as among the greatest barriers to their operation and growth.Doing Business constructs two sets of indicators of how well credit markets function—one on creditregistries and the other on legal rights of borrowers and lenders.Credit registries—institutions that collect and distribute credit information on borrowers—can greatlyexpand access to credit. By sharing credit information, they help lenders assess risk and allocate creditmore efficiently. And they free entrepreneurs from having to rely on personal connections alone whentrying to obtain credit. Three indicators are constructed to measure the sharing of credit information:• Public registry coverage, which <strong>report</strong>s the number of individuals and firms covered by a public creditregistry as a percentage of the adult population.• Private bureau coverage, which <strong>report</strong>s the number of individuals and firms covered by a private creditbureau as a percentage of the adult population.• Depth of credit information index, which measures the extent to which the rules of a credit informationsystem facilitate lending based on the scope of information distributed, the ease of access to informationand the quality of information.The data are from surveys of public registries and the largest private credit bureau in the country.Effective regulation of secured lending—through collateral and bankruptcy laws—can also ease creditconstraints. By giving a lender the right to seize and sell a borrower’s secured assets upon default,collateral limits the lender’s potential losses and acts as a screening device for borrowers. The strengthof legal rights index measures 10 aspects of the rights of borrowers and creditors in collateral andbankruptcy laws, including whether:• General rather than specific description of assets and debt is permitted in collateral agreements(expanding the scope of assets and debt covered).• Any legal or natural person may grant or take security in assets.• A unified registry operates that includes charges over movable property.• Secured creditors have priority both within bankruptcy and outside it.• Parties may agree on out-of-court enforcement of collateral by contract.• Creditors may both seize and sell collateral out of court, no automatic stay or “asset freeze” appliesupon bankruptcy, and the bankrupt debtor does not retain control of the firm.The index ranges from 0 (weak legal rights) to 10 (strong legal rights). The data were obtained byexamining collateral and bankruptcy laws and legal summaries and verified through a survey of financiallawyers.Where good-quality credit information is available and legal rights are stronger, more credit is extended.Benefits flow beyond those gaining access to credit. With better-functioning credit markets,unemployment is lower, and women and low-income people benefit the most.28
1. Historical data: Getting Credit in ChinaGetting Credit dataDoing Business2006Doing Business2007Doing Business2008Rank 94 84Legal Rights Index 2 2 3Public registry coverage (% adults) 0.4 10.2 49.2Private bureau coverage (% adults) 0.0 0.0 0.02. The following graph illustrates the Getting Credit indicators in China over the past 3 years:2230.400010.249.2Legal Rights IndexPublic registry coverage (%adults)2005 2006 2007Private bureau coverage (%adults)29
Page 1 and 2: China
Page 3 and 4: © 2007 The International Bank for
Page 5: IntroductionDoing Business 2008 is
Page 8 and 9: 9. In China, a new property law put
Page 10 and 11: Summary of Indicators - ChinaStarti
Page 12 and 13: Starting a Business in China: Entry
Page 14 and 15: 3. Steps to Starting a Business in
Page 16 and 17: The following table shows Starting
Page 18 and 19: 1. Historical data: Dealing with Li
Page 20 and 21: 13. Review of construction drawings
Page 22 and 23: The following table shows Dealing w
Page 24 and 25: 1. Historical data: Employing Worke
Page 26 and 27: The following table shows Employing
Page 28 and 29: 1. Historical data: Registering Pro
Page 30 and 31: 4. Benchmarking Registering Propert
Page 34 and 35: 3. Benchmarking Getting Credit Regu
Page 36 and 37: Protecting Investors in ChinaOffici
Page 38 and 39: 3. Benchmarking Protecting Investor
Page 40 and 41: Paying Taxes: Tax Payable and Compl
Page 42 and 43: 3. Benchmarking Paying Taxes Regula
Page 44 and 45: Trading Across Borders: Importing a
Page 46 and 47: 3. Benchmarking Trading Across Bord
Page 48 and 49: Enforcing Contracts: Court Efficien
Page 50 and 51: 3. Benchmarking Enforcing Contracts
Page 52 and 53: Closing Business in China: Bankrupt
Page 54 and 55: 3. Benchmarking Closing Business Re
Page 56 and 57: APPENDICESStarting a Business in Ch
Page 58 and 59: - Appointment documents and identif
Page 60 and 61: Cost to complete:Comment:no chargeA
Page 62 and 63: 14 *Receive review of building draw
Page 64 and 65: Procedure1Request and obtain approv
Page 66 and 67: Comment:Procedure6The Shanghai Hous
Page 68 and 69: Procedure14Receive review of buildi
Page 70 and 71: Comment:No time limits apply for in
Page 72 and 73: 建建建建建建建建建
Page 74 and 75: Employing Workers in ChinaEmploying
Page 76 and 77: Registering Property in ChinaThis t
Page 78 and 79: Procedure3(v) Photocopy of the iden
Page 80 and 81: Protecting Investors in ChinaThe ta
Page 82 and 83:
Paying Taxes in ChinaThe table belo
Page 84 and 85:
Trading Across Borders in ChinaThes
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