China's position in global competitiveness ranking

  With its increasing role in the world economy, China's position in the global competitiveness ranking has always attracted widespread attention.

  The Chinese mainland was rated 12th among the 30 economies in its group in the last global competitiveness ranking issued by the Swiss International Institute for Management Development (IMD) earlier in 2003, the same level as listed in the previous year.

  However, its position declined in some indexes on the scoreboard published by the World Economic Forum (WEF) later in 2003.

  Global Competitiveness Pattern

  Generally speaking, the basic pattern of global competitiveness remains unchanged. The growth of the first group of the world's economies, which include the United States, Western Europe, Japan and other developed countries/regions, slowed down or stagnated, and their unemployment rates began to rise. However, they are positioned in the first group on the global competitiveness scoreboard, with Finland rated the most competitive country in the world.

  In the WEF's Global Competitiveness Report 200304,Finland overtook the United States in both Growth Competitiveness Index (GCI) and Business Competitiveness Index (BCI),retaking the leading position after dropping to second place behind the United States in the previous year.In the IMD's World Competitiveness Yearbook 2003, the United States stands first in the group of countries and regional economies each with a population of over 20 million,while Finland comes out on top in the other group of countries and regional economies each with a population of less than 20 million.

  Although witnessing varying degrees of economic downturn, the emerging market countries and regions, such as Hong Kong, Taiwan, Singapore and Malaysia, still maintained an upward momentum of competitiveness. Some have gradually entered the first group in terms of competitiveness.

  In the WEF ranking, the position of Taiwan's competitiveness has been rising on an annual basis over the past years, beating many traditional developed countries/regions to reach the third place in 2003.

  The situation is complex with countries in the former Soviet Union and East European regions, which are undergoing economic transformation. In relation to their global competitiveness, 13 such countries sampled by the WEF have gradually split up into two groups. One consists of eight countries and their positions in GCI and BCI are ranked between 20th and 50th. The other comprises the remaining five countries and their rankings in GCI and BCI range between 64th and 84th.

  In the second and third group, large developing countries—China, India, Brazil and Argentina—witnessed minor changes in their rankings. In the WEF's global competitiveness rankings, China, India and Brazil are in the second group, while Argentina remained in the third group. Besides the countries undergoing economic transformation in the former Soviet Union and East European regions, the third group mainly comprises developing countries from Asia, and especially those from Africa and Latin America.

  China's Position and Change

  China stands at uppermiddle level in the 2003 global competitiveness comparison of the WEF and IMD.

  Judging from its position in the WEF's Global Competitiveness Report 200304, China has been ranked lower in GCI and BCI compared with the previous year, ranking 42nd in GCI, a slide of four positions, and 45th in BCI, down seven positions.

  However, these downward shifts, which fall in the normal margin, do not necessarily mean any substantive changes in its competitiveness.

  The change in China's GCI rank is attributable to the following two reasons:

  First, the adjustment of indicators. In the Macroeconomic Environment Index components, Government Waste is used to replace the former variable, the Government Expenditure as a Percentage of GDP. Previously, the smaller a country's government expenditure as a percentage of GDP, the higher its position in the Government Expenditure ranking. In fact, this implicitly assumed that economic growth would be maximized at zero government expenditures.

  WEF does “not think that this is a good assumption, since many public expenditures are productive and contribute positively to the competitiveness of a nation.” It decided that a variable that captures public waste rather than public spending should be used.

  In 2002, China ranked 17th in the Government Expenditure as a Percentage of GDP, but plunged to 32nd position in the 2003 Government Waste subindex. This affects China's ranking to a certain extent. Based on the new formula, China's GCI ranking should be 38th in 2002 instead of the former 33rd.

  Second, the significant decline in the Public Institutions Index ranking. In the three component indexes of GCI, China sees no change in its Technology Index (63th) ranking and Macroeconomic Environment Index (24th). The decline is chiefly attributable to the country's sharp slide in the Public Institutions Index ranking, from 38th in 2002 to 48th in 2003.

  In BCI, China ranks 42nd in the Company Operations and Strategy ranking, a fall of four positions from the previous year, and 43rd in the Quality of the National Business Environment ranking, down five positions. Both combined to result in a downward shift of seven positions of China in the BCI ranking.

  Over the past four years, China has stood around 40th in the BCI ranking, with minor fluctuations.

  China was pulled down this time mainly by “concerns about red tape, corruption, judicial independence and trade barriers among other factors.”

  In IMD's World Competitiveness Yearbook 2003, both China's mainland and its Zhejiang Province are placed in the first group in the global competitiveness ranking, which comprises 30 countries and regional economies.

  China's mainland is placed 12th in the overall ranking of this group, with its highest position being second in the Economic Performance and its lowest 24th in the Business Efficiency. It stands at ninth in the Government Efficiency and 17th in the Infrastructure.

  According to IMD calculations, China's mainland's competitiveness ranking would move one position upward based on the simulation of the average value of its 20 weakest indexes. Then it would overtake Japan to take the llth position.

  Zhejiang Province is sampled for the first time in the IMD world competitiveness ranking. It stands at 13th in the overall ranking, and is placed 10th in both the Economic Performance and Government Efficiency, 14th in the Business Efficiency and 23rd in the Infrastructure.

  The fact that Zhejiang is ranked 13th, falling behind China's mainland's position (12th), seems abnormal, since Zhejiang is one of the most rapidly developing regions in China. There are three reasons for this: First, the ranks in many indexes are arranged based on overall volumes.

  The lack of many statistical data also led to Zhejiang's lower ranking. Second, the results in Zhejiang's investigation questionnaire actually reflect the evaluation of those surveyed on their region, province as well as the whole nation. Third, the survey results are considerably subjective, a common problem in such surveys.

Source: Yearbook 2004