Wednesday, July 15, 2009

Hu is afraid of the big bad state police?

In the World Bank’s annual Doing Business Survey, the People’s Republic of China is regularly ranked in the middle of table. For 2009, it was ranked 83rd overall out of 181 countries in terms of the ease of doing business. It is immediately preceded by Trinidad and Tobago, Panama and Kenya, and ranked right below it are Grenada, Belarus and Albania.

The rest of the so called BRIC economies do not fair any better with the Russian Federation at 120th, India at 122nd, and Brazil at 125th place. The rankings in the survey are determined by a set of criteria including the ease of starting a business, getting construction permits, ease of hiring, enforcing contracts, protecting investors, securing credit, paying taxes, trading across borders and the ease of closing down a business.

In economic studies, these rankings are often used as “proxy” indicators for institutional quality. Dani Rodrik has for years controversially raised the point that the rapid growth of countries like China provides evidence that poor institutional quality aka corruption is not necessarily a roadblock to development.

Enter Rio Tinto executive Stern Hu. What impact, if any, will his being incarcerrated for allegedly bribing officials and in the process stealing “state secrets” have for the future of doing business in China?

1 comment:

  1. This is no doubt re Hu that the PRC are playing some sort of resource based ion ore price game I reckon on Hu is merely apawn in the game