Doing Business in China: Fang-guan-fu Reform and the Business Environment of Private Enterprises

Abstract: The Fang-guan-fu ("decentralise-regulate-service") reform represents a major regulatory initiative in China, aimed at streamlining/decentralising administrative procedures, reinforcing regulatory oversight and improving government services. The authors focus on how these reforms have influenced private enterprises' perceptions of the business environment. Utilising China Entrepreneurship Statistics survey data, the authors employ propensity score matching (PSM) and multiple variables ordinary least squares (OLS) regression. Findings indicate the reform's effectiveness in enhancing government efficiency and the quality of regulatory practices. Firms that perceive benefits from the reform tend to report higher levels of satisfaction with local business conditions. However, after accounting for selection bias, the estimated effects become more moderate, implying that firm-specific characteristics also contribute to shaping perceptions of the business environment. While the reform has reduced bureaucratic inefficiencies, its benefits have not been evenly distributed. Larger firms and enterprises in more developed regions have benefitted from greater gains, whereas small- and medium-sized enterprises continue to face regulatory challenges. These disparities highlight the need for targeted policy adjustments to ensure broader inclusion. Beyond its impact on China's domestic regulatory framework, the fang-guan-fu reform offers valuable insights into the broader discourse on state–market relations and institutional modernisation. This study therefore contributes to the theoretical understanding of business–state interactions by examining how regulatory restructuring influences firms' perceptions of the business environment.