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Has China lost competitive edge?
By Suzanne Rosselet |
February 15, 2011, Tuesday
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Print Edition
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ALTHOUGH China's competitiveness has been rising over the years, its stellar economic performance could be masking other factors that prevent it from moving into the top league of the world's most competitive nations.
Competitiveness is more than just about a country's size, wealth, economic power or growth. China's "nuts and bolts" - its hardware - appears strong and resilient but what about its "soft power"?
Whereas China excels in providing a predictable environment - at least companies generally know the rules of the game even if they aren't always what they like - the country doesn't do as well in terms of transparency.
For example, China ranks 18th (out of 58 countries) for the implementation of government decisions but only 39th for the transparency of its policies.
Foreign managers are grumbling about rising discrimination and a tougher domestic market. In terms of the freedom that foreign investors have to acquire control in domestic companies, China ranks 56th.
For the last three decades, foreign companies were welcomed with open arms and enticing incentives. Competition was mainly for export markets and among multinationals; today it's more a question of survival in the face of stronger domestic rivals.
State ownership of enterprises and the advantages that accrue to their status (preferential loans, hidden subsidies, etc) distort the competitive arena.
This helps explain why foreign business leaders have notched up their rhetoric about an increasingly difficult business climate.
And China's business environment is rapidly changing. New labor laws, stricter environmental regulations and a rising cost of doing business have made foreign companies more wary. Add in more demands for pay hikes and the climate doesn't look so enticing anymore.
China also suffers a skills gap. Companies complain about the shortage of competent managers and lack of international experience.
Of particular mention is the scarcity of finance and IT skills and the difficulty in finding well-rounded managers with the ability to build teams and take initiatives.
Inequality
The long-term prosperity of any country depends on how people directly benefit from increased economic success.
China's leaders appear to be taking the growing inequalities in society seriously, understanding that the well-being of the population, rural and urban, requires a greater focus on health care, education, pensions and environmental protection. But China still ranks very low for: health and environment (54th), education (46th), energy efficiency (55th) and pollution problems (58th).
(Suzanne Rosselet is deputy director of IMD Business School's World Competitiveness Center. Shanghai Daily condensed the article.)
Competitiveness is more than just about a country's size, wealth, economic power or growth. China's "nuts and bolts" - its hardware - appears strong and resilient but what about its "soft power"?
Whereas China excels in providing a predictable environment - at least companies generally know the rules of the game even if they aren't always what they like - the country doesn't do as well in terms of transparency.
For example, China ranks 18th (out of 58 countries) for the implementation of government decisions but only 39th for the transparency of its policies.
Foreign managers are grumbling about rising discrimination and a tougher domestic market. In terms of the freedom that foreign investors have to acquire control in domestic companies, China ranks 56th.
For the last three decades, foreign companies were welcomed with open arms and enticing incentives. Competition was mainly for export markets and among multinationals; today it's more a question of survival in the face of stronger domestic rivals.
State ownership of enterprises and the advantages that accrue to their status (preferential loans, hidden subsidies, etc) distort the competitive arena.
This helps explain why foreign business leaders have notched up their rhetoric about an increasingly difficult business climate.
And China's business environment is rapidly changing. New labor laws, stricter environmental regulations and a rising cost of doing business have made foreign companies more wary. Add in more demands for pay hikes and the climate doesn't look so enticing anymore.
China also suffers a skills gap. Companies complain about the shortage of competent managers and lack of international experience.
Of particular mention is the scarcity of finance and IT skills and the difficulty in finding well-rounded managers with the ability to build teams and take initiatives.
Inequality
The long-term prosperity of any country depends on how people directly benefit from increased economic success.
China's leaders appear to be taking the growing inequalities in society seriously, understanding that the well-being of the population, rural and urban, requires a greater focus on health care, education, pensions and environmental protection. But China still ranks very low for: health and environment (54th), education (46th), energy efficiency (55th) and pollution problems (58th).
(Suzanne Rosselet is deputy director of IMD Business School's World Competitiveness Center. Shanghai Daily condensed the article.)
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