How China is becoming one of the most competitive countries in the world

23 Feb

A few weeks ago was unveiled the 2011-2012 edition of the Global Competitiveness Report (GCR), a yearly report published by the World Economic Forum which ranks countries based on the Global Competitiveness Index. The first report was released in 1979. The 2011–2012 report covers 142 major and emerging economies. On the latest edition of the report China (which ranks 26th) continues to lead the way among large developing economies, improving by one more place and solidifying its position among the top 30.

China has improved its score and rank each year since 2005. The world’s most populous country continues to lead the BRICS economies by a significant margin. Why?

Key points of China competitiveness

Good macroeconomic situation. Despite its prolonged high inflation (which usually is over 5-6%) China’s macroeconomic situation is again very favorable (ranking 10th in the world in that aspect).

Low debt and high savings. China is one of the world’s least indebted countries, boasts a savings rate of some 53 percent of GDP, and runs only moderate budget deficits. These factors, combined with good economic prospects, contribute to an improvement of the quality of its sovereign debt far greater than that of the other BRICS.

High standards in health and education. China also achieves relatively high standards in terms of health and basic education (ranks 32nd), with positive trends in health indicators and nearly universal access to primary education, which is well assessed in terms of quality.

The Chinese culture has a tradition of placing a high premium on learning and on continuing education. An ancient proverb says “Never stop learning as long as you live.”

Improve in innovation and business. Turning to the more sophisticated areas of competitiveness, China ranks high in business sophistication (37th) and innovation (29th), particularly when considering its level of development.

Financial market development. The country improves markedly in financial market development (48th in the world, up nine spots), thanks to an increased availability and affordability of financial services and better access to credit.

Internet and mobile penetration. China is also making strides in technological readiness (77th, up one), largely because of double-digit growth in the penetration rates of Internet use and mobile telephony.

What still needs to be improved

Corruption and judicial independence. On a less positive note, a number of challenges persist in the areas of corruption and judicial independence within the institutions.

Decline in safety. Moreover, the sentiment among businesses is that the country has become less safe over the past three years, resulting in higher costs for protection against diverse forms of crime and violence.

Poor accountability. Standards of business ethics (57th) and corporate accountability (66th) are below those found in a number of other economies. As in previous years, China’s fairly poor results in the financial market development and technological readiness pull down the economy’s overall competitiveness performance.

According to the report, businesses think that some of the most problematic factors for doing business in China are inflation, access to financing, inefficient government bureaucracy, policy instability, corruption, and inadequate supply of infrastructure.

For further information:

The Competitiveness of China’s labour costs

The Myth of Chinese Competitiveness

Enhancing China’s Competitiveness Through Lifelong Learning

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