China's general competitive advantage took a dive this year, largely due to a decline in the quality of the country's macroeconomic environment, according to the Global Competitiveness Report 2005-2006 released by the World Economic Forum (WEF) on September 28.

According to the report, Finland remains the most competitive economy in the world and tops the rankings table for the fourth time in five years. The United States second, followed by Sweden, Denmark, Taiwan and Singapore, respectively. Hong Kong is ranked 28th.

Among the 117 global economies covered in the report, China ranks 49th, three places down from last year. One of the reasons for this is that the WEF expanded the report's country coverage for this year's survey, and many of the new listings came in at higher rankings than China. The WEF added that rankings that float within a range of 10 places up or down do not necessarily reflect a substantial change in the country's competitive advantage. However, a drop in ranking on some indices is noteworthy.

Ranking criteria includes factors related to business environment, which are crucial for sustainable economic growth. Researchers paid particular attention to macroeconomic environment, quality of public institutions, and technology innovation and operational readiness.

China’s macroeconomic environment ranked 24th last year, but dipped to 33rd this year. Augusto Lopez-Claros, chief economist and director of the WEF's Global Competitiveness Programme, offered some possible reasons for the decline. He cited government restraints on personal savings, a decline in related loan indices, and accelerated inflation due to a marked rise in consumption.

On the business competitiveness index, China experienced a slide in rank as well, from 47th last year to 57th this year. This index measures current enterprise productivity and the effective use of available resources. Operation and strategy are also taken into account when measuring business competitiveness.

On the technology index, China ranked a low 64th, two places lower than last year.

China's public institutions were ranked 56th this year, dropping one place from last year.

Claros pointed out that the growth of the Chinese economy can be attributed to factors including improved resource distribution efficiency, increased productivity as a result of more open policies, and urbanization, a key promoter of gross domestic product (GDP) growth.

However, problems with China's public institutions have had an impact on the economy. If these problems are not solved, China’s competitiveness will not improve, said an International Finance News report on September 26. Areas that need urgent attention include banking system efficiencies, basic social security especially in relation to the growing number of unemployed and aged people, healthcare and education to ensure the sustainable development of human resources, and the legal system.

The first global competitiveness report was issued by the WEF 26 years ago. It is published annually and combines “hard data” – country statistics that are publicly available – and “soft data” – results from enterprise surveys.

(China.org.cn by Xu Lin September 30, 2005)