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Perpetuating a virtuous circle of development

(China Daily)
Updated: 2010-09-14 13:45

The Global Competitiveness Report points to a number of challenges.

The government must tackle corruption and create a fairer, more predictable institutional environment for business.

Similarly, the private sector must bring the levels of transparency, accountability and corporate ethics in line with international standards, buttressed by stronger investor and shareholder rights.

And business and government must work together to further develop and upgrade transport infrastructure, especially in inland regions.

China also faces a major challenge in ensuring that its labor force is able to meet the needs of its rapidly developing economy.

The problem relates both to the availability of qualified workers, as well as rigidities in the labor market.

Further, employees' aspirations are rising fast and this may give rise to tensions, as reflected in recent worker unrest.

Indeed, our latest results point to a deterioration in the relationship between employers and workers in the country.

In this light, China must increase the flexibility of its labor market, and adapt its higher education and training system to better reflect the needs of the more advanced economy that it is becoming.

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Finally, the financial sector must be further developed and improved.

Tight control, overregulation and dominance by State-owned banks continue to distort competition within the banking industry, giving rise to inefficiencies, and leading to a sub-optimal allocation of capital.

Indeed business executives surveyed in China in the context of our annual Executive Opinion Survey consider that access to finance is the most problematic factor for doing business in the country.

China has made impressive strides in recent years at putting in place a strong foundation for sustained prosperity.

By stepping up its efforts in such critical areas as improving its institutional environment and increasing the efficiency of its markets, it will be able to unleash its full economic potential, and thus perpetuate a virtuous circle of growth going well into the future.

The authors are Robert Greenhill, managing director and chief business officer of World Economic Forum, Jennifer Blanke, lead economist of Global Competitiveness Network and World Economic Forum, and Thierry Geiger, senior economist of Global Competitiveness Network and World Economic Forum.