An Analysis of China's International Competitiveness

An Analysis of China's International Competitiveness

Ahu Coşkun Özer (Marmara University, Turkey)
DOI: 10.4018/978-1-5225-8980-8.ch003

Abstract

The criteria used in measuring the competition the country level, determined by the International Management Development Center in the World Competitiveness Report, are economic performance, government efficiency, business efficiency, and infrastructure. The international competitiveness of China, which is claimed to be some position with the United States in the world market in 2050, has been evaluated in this study, based on IMD competitiveness criteria. China has great progress in development through major changing strategies, methods, and reforms over the last 70 years. According to the international competition report, its rank is 13th in the international competition. The reason for China's capability on international competitiveness and its impact on the world economy is based on the fact that it combines cheap labor with the liberalization in foreign trade and foreign direct investment.
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Introduction

China has great progress in development through major changing strategies, methods, and reforms over the last seventy years. According to the international competition report, its rank is 13th in the international competition. China's economic success is based on significantly more stable governments, trade supported by state, industry and investment policies, and the implementation of macroeconomic policies which mainly control inflation and public account deficits. The reason for China's capability of international competitiveness and its impact on the world economy is based on the fact that it combines cheap labor with the liberalization in foreign trade and foreign direct investment.

Although China is not at the first rank of international competitiveness, it has become one of the most competitive countries in the world with its economy. The breakthroughs are noteworthy in China, which is expected to have greater economy than the U.S. economy, which ranks first in international competition (Sachs, 2004., as cited in Fishmen 2006). According to the 2018 Competition Report of the International Institute of Management Development (IMD), China ranks 13th among 63 economies in competition.

The international competitiveness of China, which is claimed to be some position of the United States in the world market in 2050, has been evaluated in this study, based on IMD competitiveness criteria.

Background

International competitiveness depends on some basic factors. According to the Porter (1990), “A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Upgrading an economy is the result of broadening and upgrading the competitive advantages of a nation’s firms” (as cited in Bhatt, 2008).

International competitiveness has been explained by the theoretical approach based on the comparative advantage, and depends on factor price in production(Ricardo and Heckscher-Ohlin). Ricardo focused on one production factor and technological differences. Heckscher and Ohlin facous on labor and capital inputs, comparative advantage depends on the relative factor prices differences and differences in factor endowments(Adams, Gangnes & Shachmurove, 2006). Also, IMD's world competitiveness ranking based on economic performance, business efficiencey, government efficiency, and infrastructure.

Analyses on China's international competitiveness in the literature are limited. According to the Adams, Gagnes and Shachmoure (2006) China's export competitiveness depends on several factors: low wages with supply of unskilled labour, low cost of transportation and communication, favourable exchange rate, foreign direct investments, foreign management and its implications for China's productive abilities, foreign trade policy, the opening of the world markets and the large scale of the potential Chinese domestic market. Bei, Gang, and Zhi (2006) state that the international competitiveness of China manufacturing has been improved greatly and that development is mainly due to the sustaining promotion of competitive advantage. Many factors give the advantage to China on international competitiveness.

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Main Focus Of The Chapter

The IMD World Competitiveness Index is comprised of four sub-indices which are divided into 20 pillars made up of 323 variables. The sub-indices are economic performance, government efficiency, business efficiency, infrastructure. In this research, China's international competitiveness analyzed with IMD’s four sub-indices. The factors that provide the international competitive advantage to China is analyzed based on the IMD criteria. According to the IMD World Competitiveness Ranking 2018, the U.S.A was the 1st ranking, Hong Kong was the 2nd ranking, Singapore was in 3rd ranking. According to the IMD Competitiveness ranking China ranked 23rd in 2014, China raised to 13th position in 2018.

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