China’s Economic Competitiveness Still Lags Its Growth In Muscle

China has moved up two places to 27th in the latest annual rankings of national competitiveness published by the World Economic Forum. Hong Kong and Taiwan, which are ranked separately, are at 11th and 13th, unchanged and down one, respectively. Hong Kong remains the most competitive economy in the Asia-Pacific region thanks to its financial markets and improved infrastructure.

The report says that “China shares with mid-range European countries the relative handicap of rigid institutions and very low innovation. But the country is quickly catching up on infrastructure and market efficiency and will increasingly benefit from its expanding market size.” It also notes that  “market size, flexible labor markets, and strong innovation are at the core of the U.S. competitive advantage.” The U.S. ranks fourth overall, down two places from last year’s survey. Switzerland remains no 1 overall.

China is the only one of the four Brics to have improved its ranking this year, and so extends its lead over them. The lift of two places comes almost entirely from improvements to China’s financial markets. The report also says that “China has made small strides in the quality of higher education and training, but there remains considerable room for improvement in what constitutes an important area going forward. In addition, although the labor market is indeed quite efficient, a lack of flexibility constitutes a major challenge.”

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