GENEVA — The U.S. retained its top ranking as the world’s most competitive economy in 2005, spurred by the vitality of savvy business talent, abundance of technology, a mobile workforce and a large capital market, according to a global business survey published today.
However, the world’s fastest-growing economy — China — which last year expanded by 9.5 percent, posted a sharp drop to 31st position, compared with 24th a year earlier, according to the “World Competitiveness Yearbook 2005” compiled by the Lausanne, Switzerland-based International Institute for Management Development.
“China’s surprising fall, despite an excellent economic performance, is due to an extremely negative opinion survey conducted in the business community in [first quarter] Q1-2005,” said IMD professor Stéphane Garelli. “It sees that the sustainability of such a rapid expansion is being questioned, while the strains on the financial system, infrastructure and weaknesses of corporate governance are being highlighted.”
On the end of textiles and apparel quotas, Garelli noted that by keeping its currency, the yuan, pegged at a rate of 8.28 to the dollar, China has been able to take advantage of the end of quotas and boost its exports.
The explosion in textile exports, he added, also shows how quickly China can turn a low exchange rate opportunity “into a huge competitive advantage.”
But the survey, which measures the competitiveness of 60 economies using 314 criteria — with two-thirds based on hard statistical data and one-third from data obtained from the poll of 4,000 senior executives around the world — shows concerns are on the increase over China’s path.
China ranked third for economic performance but polled low in many other business criteria essential for enhancing the business environment. In business efficiency, for instance, it fell to 50th from 35th last year, while having poor placement for infrastructure, productivity and efficiency, management practices, business legislation, financial institutional transparency and for bribery and corruption.
Other economies with important textile and apparel export sectors that posted gains in the competitiveness stakes included Hong Kong, ranked second, up four slots from a year earlier, while Taiwan climbed to 11th, Thailand to 27th, South Korea to 29th, Turkey to 48th and Brazil to 51st.
This story first appeared in the May 17, 2005 issue of WWD. Subscribe Today.
Among the nations that experienced falls were India, which fell to 39th from 34th, and Indonesia, which dropped to 59th from 58th. Mexico’s status remained unchanged at 56th.