US Tops GCI Competitiveness List As China Gains Ground
Wed, Oct 31 2007 by Joe Parkinson, Dow Jones Newswires
Despite concerns over its fiscal discipline, the U.S. has regained its place as the world's most competitive economy, but China is hot on its heels, climbing the rankings quicker than any other country, according to the 2007/2008 Global Competitiveness Index, released Wednesday.
The Global Competitiveness Index, or GCI, is produced annually by the Geneva-based World Economic Forum, best known for organizing the Davos business forum that takes place every January.
The GCI's headline findings - using data collected before the recent tumult in global financial markets - show the U.S. economy setting the standard in market efficiency, higher education, innovation and business sophistication.
"The efficiency of the country's markets, the sophistication of its business community and the impressive capacity for technological innovation all contribute to make the U.S. a highly competitive economy," said Xavier Sala-i-Martin, professor of economics at Columbia University, and coeditor of the report.
The new rankings will be considered a vindication by those who objected to the U.S.'s position in last year's index. In the 2006/2007 GCI, the U.S.' position dropped to sixth place from first place, falling behind Switzerland and the high-taxing Scandinavian economies.
But, the news isn't all rosy for the U.S. Jennifer Blanke, senior economist at the World Economic Forum, said the impact of the recent credit difficulties illustrates the urgency with which the U.S. must continue to address macroeconomic imbalances, namely its $790 billion current account deficit and $800 billion trade deficit.
"The seeds of the subprime mess can be seen in these imbalances," she said. "If the U.S. doesn't get its macroeconomic house in order, its economic future is in serious danger."
But the U.S.'s weakness is a source of strength for China, according to the GCI. Due in part to fiscal discipline and macroeconomic stability, and in part to a change in GCI methodology that puts greater emphasis on the size of domestic and international markets, China has soared 20 index places in one year.
China and its companies have benefitted from huge domestic and foreign markets, macroeconomic stability and manageable government debt, the GCI said.
Blanke said "China is the strongest of the large emerging economies. It has done considerably more than India to get the basics right."
But, despite the rise, the GCI warned that China, now ranked 34th out of the 131 countries surveyed, has three major economic weaknesses that cut into its competitiveness: financial markets, higher education and training.
China ranks 118th in financial market sophistication, with poor ratings in the soundness of its banks, legal rights and regulation of securities exchanges, the GCI said.
The lack of transparency of government policy-making and poor higher education enrollment rates also limit China's productivity.
This year's index again ranked Switzerland, Sweden, Denmark and Finland inside the top six most competitive economies, praising the efficiency of their institutions and fiscal discipline. And, the U.K. reclaimed its place inside the top 10, rising to ninth place due to the quality of its financial markets being ranked second globally.
Despite concerns over its fiscal discipline, the U.S. has regained its place as the world's most competitive economy, but China is hot on its heels, climbing the rankings quicker than any other country, according to the 2007/2008 Global Competitiveness Index, released Wednesday.
The Global Competitiveness Index, or GCI, is produced annually by the Geneva-based World Economic Forum, best known for organizing the Davos business forum that takes place every January.
The GCI's headline findings - using data collected before the recent tumult in global financial markets - show the U.S. economy setting the standard in market efficiency, higher education, innovation and business sophistication.
"The efficiency of the country's markets, the sophistication of its business community and the impressive capacity for technological innovation all contribute to make the U.S. a highly competitive economy," said Xavier Sala-i-Martin, professor of economics at Columbia University, and coeditor of the report.
The new rankings will be considered a vindication by those who objected to the U.S.'s position in last year's index. In the 2006/2007 GCI, the U.S.' position dropped to sixth place from first place, falling behind Switzerland and the high-taxing Scandinavian economies.
But, the news isn't all rosy for the U.S. Jennifer Blanke, senior economist at the World Economic Forum, said the impact of the recent credit difficulties illustrates the urgency with which the U.S. must continue to address macroeconomic imbalances, namely its $790 billion current account deficit and $800 billion trade deficit.
"The seeds of the subprime mess can be seen in these imbalances," she said. "If the U.S. doesn't get its macroeconomic house in order, its economic future is in serious danger."
But the U.S.'s weakness is a source of strength for China, according to the GCI. Due in part to fiscal discipline and macroeconomic stability, and in part to a change in GCI methodology that puts greater emphasis on the size of domestic and international markets, China has soared 20 index places in one year.
China and its companies have benefitted from huge domestic and foreign markets, macroeconomic stability and manageable government debt, the GCI said.
Blanke said "China is the strongest of the large emerging economies. It has done considerably more than India to get the basics right."
But, despite the rise, the GCI warned that China, now ranked 34th out of the 131 countries surveyed, has three major economic weaknesses that cut into its competitiveness: financial markets, higher education and training.
China ranks 118th in financial market sophistication, with poor ratings in the soundness of its banks, legal rights and regulation of securities exchanges, the GCI said.
The lack of transparency of government policy-making and poor higher education enrollment rates also limit China's productivity.
This year's index again ranked Switzerland, Sweden, Denmark and Finland inside the top six most competitive economies, praising the efficiency of their institutions and fiscal discipline. And, the U.K. reclaimed its place inside the top 10, rising to ninth place due to the quality of its financial markets being ranked second globally.