China’s economy is getting more globally competitive as a result of its success in managing the coronavirus pandemic, while Hong Kong’s has been dragged down by a deteriorating labour market and a decline in international investment, Switzerland’s IMD business school said in a report released on Thursday.
China’s post-pandemic economic performance has been a key driver of its improving global competitiveness and its management of the virus contributed significantly to its higher ranking this year, said Christos Cabolis, chief economist at the International Institute for Management Development’s (IMD) World Competitiveness Centre.
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China’s economy grew by 18.3 per cent in the first quarter of 2021 compared with a year earlier, the highest quarterly year-on-year growth since 1993, as the country rebounded from the worst of the pandemic early last year.
Cabolis said Asian economies, including China and Taiwan, were among those that had strong success in tackling the Covid-19 public health crisis, which helped to steady their business environments.
“The US, for instance, dealt poorly with respect to the health crisis,” he said. “Others tried to tackle the health crisis but the economy suffered, like Hong Kong, Singapore and Australia.”
The US, however, implemented effective fiscal and monetary policy, providing ample liquidity to support economic activity, which helped cushion the blow of the pandemic despite a high number of infections, Cabolis said.
The annual rankings, which use hard data and surveys with executives, measure the prosperity and competitiveness of 64 nations on economic performance, government efficiency, business efficiency and infrastructure.
The Swiss-based IMD ranked the US economy at 10, unchanged from last year, while Taiwan’s economy reached the top 10 the first time since the rankings began 33 years ago, moving from 11th last year to eighth this year.
Singapore’s economy is still the top performer in Asia, although it lost its number one spot to Switzerland this year, sliding to fifth.
While China is becoming increasingly competitive, there is room to improve its infrastructure, environment, education and health system, Cabolis said.
“If we think about the eradication of poverty, this is a major win for the country, so to continue advancing these, it will definitely improve competitiveness,” Cabolis said.
Hong Kong saw a slight decline in its overall economic performance compared with last year, amid a worsening investment and employment environment, the IMD report said.
Its private sector productivity and public finances also declined, although the city still scored high for government efficiency.
Closing its borders to contain the pandemic has had a strong impact on Hong Kong’s talent pool, Cabolis said.
“Hong Kong relies a lot on [connecting with] the global environment, issues of mobility, especially with respect to employment, are fundamental,” Cabolis said, adding the same was true for Singapore.
Responding to the slide down the competitiveness rankings, the Hong Kong government said the city continued to serve as a “gateway, springboard and intermediary” into China.
“As a small and open economy, Hong Kong has faced unprecedented challenges over the past couple of years. Yet, we are confident that Hong Kong’s institutional strengths, including the rule of law and independence of the judiciary, free trade and investment regimes, a simple and low tax system, a favourable business environment and an efficient government, remain unscathed,” a government spokesman said in a statement.
Hong Kong retains the top position for government efficiency, while the city ranks slightly lower than previous reports in aspects such as economic performance, business efficiency and infrastructure.
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