What Would You Do With $400 billion?

As with so many things related to China, the numbers are just staggering. The Chinese government intends to invest $400 billion in trade logistics infrastructure by 2010. A sizeable amount of this will be used to improve port infrastructure in cities such as Dalian, Tianjin and Qingdao.

These infrastructure investments are timely and sensible. With the ongoing growth in Chinese trade - exports increased by more than 21% for the first three months of 2008 - port capacity has to keep pace. The Chinese clearly understand that to pursue a strategy of export-led growth, trade logistics have to be in order. In an integrated global economy, supply chains have to be reliable and fast. It is therefore not surprising that all of the so-called Asian tiger economies - which succeeded through export-led growth - score in the top 30 on the Doing Business Trading Across Borders indicator.

Not all countries are lucky enough to have $400 billion to spend on infrastructure. But expensive infrastructure projects are not the only option open to countries that wish to increase trade. In many cases, administrative hurdles are just as onerous for traders as poor infrastructure. Given political will, these can be removed at little or no cost to governments with the stroke of a pen. The stakes are high: research indicates that for each additional day of delay, trade is reduced by at least one percent.

At No. 42 on the trade indicator, China already performs relatively well, but there is nevertheless scope for improvement. Chinese exporters still need to submit 7 documents to various agencies in order to complete an order, and importers require 6 documents before their goods can be cleared. This compares with only 4 documents for both imports and exports in neighboring Singapore and Hong Kong (China). China is on the right track - and cutting some of this red tape might very well propel the country into the top 10 in coming years.