Hangzhou, Shanghai, Guangzhou and Shenzhen have the best investment environments of 23 Chinese cities surveyed by the World Bank, according to a bank press release issued Thursday.

Three cities, Harbin, capital of northeast China's Heilongjiang Province; Lanzhou, capital of northwest China's Gansu Province and Benxi, in northeast China's Liaoning Province, got the worst ratings. Beijing's rating places it in the third of six grade ratings.

The survey in China, which is a part of a larger effort by a World Bank team to help countries assess their investment climates, was conducted in 2002 and 2003 with support from the Enterprise Survey Organization of China's National Bureau of Statistics.

In the assessment, the researchers gave quantitative scores in such categories as infrastructure, business entry and exit barriers, skills and technology resources, labor market flexibility, and international integration.

Criteria also included private sector participation, unregulated fees, tax levels, court efficiency and availability of financing.

The investment climate in China falls into quite clear regional areas, with the Yangtze River Delta, where Shanghai and Hangzhou are located and the Pearl River Delta, where Shenzhen is located, having the best environment, while cities in the western regions and the Northeast lag behind. The cities in Central China appear to fall in the middle range.

The cities that fall into the second level are Southwest China's Chongqing; Jiangmen, a smaller city near Guangzhou, in Guangdong Province; Changchun, in northeast China's Jilin Province; and Wenzhou, in east China's Zhejiang Province.

Cities in the third category are Tianjin; Dalian, a northeastern port city; Beijing; and Zhengzhou, capital of Henan Province in central China.

The fourth group includes: Wuhan, capital of central China's Hubei Province; Nanchang, capital of east China's Jiangxi Province; Xi'an, capital of northwest China's Shaanxi Province; and Changsha, capital of central China's Hunan Province.

Three of the four cities in the fifth level are in southwest China. They are: Chengdu, capital of southwest China's Sichuan Province; Guiyang, capital of Guizhou Province; and Kunming, capital of Yunnan Province. The fourth one in this group is Nanning, capital of the Guangxi Zhuang Autonomous Region.

The report did not provide a global ranking for countries but it commented on the investment climate of China as a whole in comparison with some other countries.

China stands out favourably in areas such as macroeconomic and political stability, integration into the world market, and infrastructure, it said.

Abundance of low-cost labour associated with rural-urban migration has been and continues to be a comparative advantage of China.

But not everything is rosy.

The report pointed out that China's financial sector is not operating efficiently. The vast majority of loans has been given to State-owned companies, many of which cannot service their debts, while small and medium-sized enterprises have to rely mainly on their own earnings and personal wealth to finance their investment.

In addition, China also lags behind many of its East Asian neighbors in terms of education levels, it said.

(China Daily HK Edition December 19, 2003)