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Behind China's rise in global competitiveness

By Yu Fenghui (China Youth Daily)

15:21, September 13, 2011

Edited and Translated by People's Daily Online

China's global competitiveness ranks 26th, one rank higher than last year, according to the Global Competitiveness Report 2011-2012 issued by the World Economic on Sept. 7.

The World Economic Forum is an internationally authoritative forum for financial studies and discussions as well as a think tank for researching and predicting the future of economic development. The Global Competitiveness Report, issued by the forum annually, is widely recognized by countries around the world.

China's ranking in the report has been on the steady rise since 2005, which reveals that the speed of China's economic development and economic strength are growing. It also indicates that China's economic environment is improving, China's innovative ability is strengthening, and China's macroeconomic management of the market is becoming more advanced. However, it does not mean that China's economy is quite perfect.

In the report, there are three reasons for China's higher global competitiveness ranking this year. First, the report lauded China's macroeconomic environment, which ranks 10th among all the 142 economies. But speaking objectively, China's macroeconomic environment still needs improvement. China still lacks the ability to operate the market economic system because it has a long tradition of managing the economy with administrative orders and other tools of a planned economy.

The market economic system's fundamental function in resource distribution is far from adequate. The invisible hands play less of a role, while the visible hands interfere too often. This is especially true with regard to the monopolistic enterprises, which are mainly state owned and are stronger in the macro-economy. This situation is extremely destructive for establishing a sophisticated market economy system. Meanwhile, there are still barriers in China's market entry which go against the requirements of a market economy system, and the efficiency of China's governmental administration is not so high.

According to the report, China is one of the countries across the world with the lowest level of debt and enjoys a high savings rate and moderate fiscal deficits. These factors and optimistic economic prospects have improved the quality of China's sovereign debt, making it far better than that of other BRIC countries.

However, China's high savings rate has also exposed its inadequate consumption that the United States and Europe has criticized and urged China to change. China's long-term high savings rate is just a manifestation of the country's irrational economic structure. The high savings rate has affected consumer demand, and the huge foreign exchange reserves have become a giant burden for China's economic development. China is striving to address these issues.

Furthermore, the report said that China is also among the top countries in indicators such as primary education, business sophistication and innovation. However, China does have some shortcomings in the indictors of business sophistication and innovation. China's business sophistication is still low and its innovative capabilities should be improved.

China's monopolistic state-owned enterprises that should take the lead in innovation just enjoy their monopoly positions and have neither enthusiasm nor pressure for innovation. Private small and medium-sized enterprises are struggling for survival and lack funds and the capability to make innovations.

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