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Has China Lost Competitive Edge?

Feb 18 , 2011

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.

Read Full Article HERE

Suzanne Rosselet is deputy director of IMD Business School's World Competitiveness Center. Shanghai Daily condensed the article.

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