The World Bank and the International Finance Corporation (IFC), said Wednesday that China's newly-revised Corporation Law drastically lowered the minimum capital required for domestic firms to begin operations, thus helping create jobs.

The new requirement, which will come into force on Jan. 1, 2006, is set at 30,000 yuan (3,703 U.S. dollars) for limited liability companies in all industries, the bank and IFC said in a report titled "Doing Business in 2006: Creating Jobs".

Previously, entrepreneurs who wished to open a manufacturing or wholesaling business had to put down 500,000 yuan, as compared to 300,000 yuan in retailing and 100,000 yuan in services.

The new law allows as much as 70 percent of the total registered capital to be in non-cash contributions such as intellectual property or technology, according to the report, which was cosponsored by the bank and IFC, the private sector arm of the World Bank Group,

Prior to this reform, China had the 8th highest minimum capital requirement in the world, equivalent to 947 percent of the country's annual per capita income, 1,290 US dollars.

Only Ethiopia, Jordan, Madagascar, Saudi Arabia, Syria, the West Bank and Gaza, and Yemen imposed higher start-up capital. Now only 6,000 yuan, or 20 percent of the lowered minimum capital, needs to be paid when opening the business, with the remainder paid up over a 2-year period.

Michael Klein, World Bank and IFC vice president for Private Sector Development and IFC chief economist, said improving regulations is vital for all entrepreneurs and key to creating more employment opportunities.

He said young people looking for their first jobs and unemployed people benefit the most from such reform.

Simeon Djankov, co-author of the Doing Business report series, said "China follows a welcome trend in reducing or eliminating the capital requirement."

Judging from other countries that have implemented similar reforms, the Doing Business report team concludes that such reform will likely increase China's number of newly-registered businesses. (1 US dollar = 8.1 yuan)

Source: Xinhua