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Doing Business In China: Just Released Global Competitiveness Ranking Says It’s Pretty Good.

Posted in China Business

I was interviewed by a reporter yesterday who is doing a story on legal pitfalls for companies doing business in China.

I listed out some of the more common ones that American companies in China encounter, including the following:

At the conclusion of my litany, the reporter said something to the effect of “why does anyone do business in China at all?”  My response was because of the opportunities and then I told her of how I think that about 90 percent of my firm’s clients actually do quite well in China.  I then mentioned that I thought that virtually every AmCham survey reveals that American companies in China have higher profits there than in the United States.  I then talked about how everything is relative and that overall and as compared to most other emerging market countries, China is a relatively easy country in which to do business.
That was borne out for me today upon reading the World Economic Forum’s latest Global Competitiveness Index (2013-2014), which ranks China 29th out of 148, right behind Ireland and right ahead of Puerto Rico (since when did Puerto Rico become its own country?).  Not bad.
The report has this to say about China:
China leads the BRICS economies by a wide margin, well ahead of South Africa (53rd), Brazil (56th), India (60th), and Russia (64th).25 The Chinese institutional framework is improving slightly (47th), but weaknesses—including corruption (68th), security issues (75th), and low levels of accountability (82nd) and ethical standards (54th) among businesses—remain. In addition, problems endure in those areas that are becoming increasingly important for China as it becomes wealthier and can no longer rely on cheap labor: its financial market (54th) is undermined by the relative fragility of the banking sector; technological adoption by firms (86th) and by the population at large (79th) remains very low; and the efficiency of its goods market (61st) is seriously undermined by various barriers to entry and investment rules, which greatly limit competition.  On a more positive note, China’s macroeconomic situation remains favorable (10th). Inflation was back down to below 3 percent in 2012 (from 5.4 percent the previous year), the budget deficit is moderate, China’s public debt-to-GDP ratio at 22.9 percent is among the lowest in the world, and the gross savings rate represents a staggering 50 percent of GDP. However, this rate is probably too high in light of the need for China to rebalance its economy away from investment and toward more consumption. Although China receives good marks in health and basic education (40th), the assessment is more negative when it comes to higher education (70th) because of China’s low tertiary education enrollment, the average quality of teaching, and an apparent disconnect between educational content and business needs (54th). Finally, China’s innovation capacity has been improving recently, but much remains done for it to become an innovation powerhouse.
Seems about right to me.  What do you think?