China’s competitiveness unchanged relative to other countries

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/41

The World Economic Forum (WEF) Global Competitiveness Index (GCI) rankings of 140 countries put China this year in 28th place. China has held its 28th position in the rankings for three years in a row. The GCI considers 114 indicators that matter for country’s productivity and long-term prosperity. The indicators are grouped under 12 pillars that include institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. The comparison does not take into account national differences in, e.g. price competitiveness.

China consistently fell into the upper-middle group for most indicators. Notable virtues of China were the exceptional size of its economy, price stability, savings levels, opportunities for air travel, share of students starting primary education, and rates of HIV and malaria. In all these categories, China was the best or among the best. China performed poorly relative to other countries in e.g. investor protection, which have gotten worse in recent years, and corporate taxation, which has become more severe. Establishing a new business is still more difficult than in many other countries and corporate governance is weak. Moreover, the broadband capacity per user is still relatively small.

Switzerland topped the GCI rankings this year. Hong Kong ranked 9th, Finland 10th and Taiwan 14th. Russia climbed in the ratings to 43rd place, up from 67th five years ago. The WEF noted Russia’s improvements in institutions, overall education level, innovation capacity and business environment. The conclusion raises questions about the reliability of the GCI indicators in capturing actual development.

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