Determinants of Global Competitiveness of Chinese Economy

The Chinese economy has reached approximately average annual growth of 9% after economic reform era that began in 1978. This economic development miracle resulted from by exploiting the economic potential of internal factors in a complimentary external environment. Main aim of this study is to investigate the determinants of the global competitiveness of Chinese economy by considering economic development process of the Chinese economy and World Economic Forum the Global Competitiveness Index. It is vital to understand the determinants of global competitiveness for the Chinese economy in order to achieve sustainable economic development path in the highly competitive world economy conditions. The result of the study shows that the Chinese economy has strong global competitiveness indicators beside some problematic indicators. The Chinese economy is becoming more competitive by improving bottlenecks and structural problems. On the other hand the Chinese economy have to transform from cheap labour-intensive competitive advantage into high-tech innovative country with high qualified human capital in order to achieve sustainable economic growth in the long term.


Introduction
Chinese economy has expanded rapidly and has a steady growth despite the slowness in the global economy.Main macroeconomic indicators better than many other countries.In the past 30 years, China has achieved average annual growth of 9%, which is considered to be China's economic miracle.China's economic development is achieved by exploiting the economic potential of internal factors in a favourable external environment.The economic globalization process brought opportunities and development spaces for China since the 1980s.Chinese policy makers have seized the favourable strategic development period.Therefore, China's economic growth miracle is also a process of China's economic integration into the global economic system (Zhigang Yuan and Yuxin Yu, 2014:41-69).
Main aim of this study is to investigate the determinants of the global competitiveness of Chinese economy by considering economic development process of the Chinese economy and World Economic Forum the Global Competitiveness Index.It is vital to understand the determinants of global competitiveness for the Chinese economy in order to achieve sustainable economic development path in the highly comepetitive world economy conditions.

Economic Development Dynamics of Chinese Economy
Naughton (2007:3) stated that the Chinese economy displays both unmatched dynamism and unrivaled complexity.China's progress during the economic reform era that began in 1978 has been one of the great economic success stories of the post-war era.China's performance is all the more remarkable in that its reforms have been gradual and its development has occurred despite extensive, though declining, state ownership and intervention in the economy.
China has been liberalising its international trade and investment policies since the mid-1980s.As it has throughout the reform era, the realisation of China's economic potential, including the full benefits of trade and investment liberalisation, rests on its success in continuing and strengthening its domestic economic reforms.(OECD, 2002:5-6) Zhigang Yuan and Yuxin Yu (2014) found that sources of economic growth, including labor supply, capital accumulation, and total factor productivity (TFP) growth, all tend to decline in the near future.It is likely that potential economic growth rate in China will fall significantly.To escape the "middle-income trap," structural adjustments of the Chinese economy should be made.Factor markets, including the capital market and land market, should be reformed so that institutional barriers that compress consumption can be eliminated and new liquidity can be injected into the Chinese economy.Besides, human capital investment should be further encouraged so that TFP growth can be promoted.China has weathered the global economic and financial crisis of the past five years better than virtually any OECD country and then many other emerging economies.It is well placed to enjoy a fourth decade of rapid catch-up and improving living standards (OECD, 2013:13) China looks set to avoid the "middle-income trap".However, a shrinking workforce will depress potential growth, and the state-dominated economy will require reform if it is to deliver the productivity gains needed to enable China to catch up with most developed economies.(TheEconomist Intelligence Unit, 2014).China has now overtaken the euro area and is on course to become the world's largest economy around 2016, after allowing for price differences.Living standards will continue to improve fast provided reforms are implemented.More recently, activity has regained momentum, helped by policy easing and a pick-up in infrastructure spending, but the global economic context remains fragile.(OECD, 2013:8).
Table 1 shows the macroeconomic developments and prospects for the Chinese economy.The global economic and financial crisis that erupted in 2007 hit Chinese exports but swift policy action mitigated the impact on the economy.
As a result, year-average growth remained above 9% in 2008-2010.However, in the face of overheating symptoms and sectoral imbalances, corrective action was undertaken in 2011, contributing to a slowdown that was amplified by a weakening and uncertain international environment, so much so that policy reversed gears around mid-2012.Growth troughed at 7.8% in 2012 and is set to regain momentum in 2013-14.

Insert Table I
Figure 1 shows GDP and population indicators for Chinese economy.GDP (ppp) per capita for the Chinese economy has been increasing strongly.

Insert Table II
Table 2 shows the growth accounting for the Chinese economy.The contribution of total factor productivity gains to overall growth has steadily declined over the past three five-year periods.(OECD, 2013)

Methodology and Application
One of the most important sources of the sustainble economic growth for a country is strong global competitiveness level of economy.World Economic Forum (2014:4) defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country.The level of productivity, in turn, sets the level of prosperity that can be reached by an economy.The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates.In other words, a more competitive economy is one that is likely to grow faster over time.Figure 3 shows the global competitiveness index framework and Table 3 shows the subindex weights and income thresholds for stages of development.

Analysis and the Results
Table 4 shows countries/economies at each stage of development according to threshold income level in Table 3.The Chinese economy is at stage 2, which means efficieny-driven economy phase, before the innovation-driven phase.

Insert Table IV
Table 5 shows the global competitiveness index 2014-2015 rankings and 2013-2014 comparisons.The rank of the Chinese economy is 28 for 2014-2015 ranking, whics is very important success for the Chinese economy.

Insert Table V
Table 6 shows global competitiveness index indicators for Chinese economy.The rank of the Chinese economy is 28 for 2014-2015 ranking and 26 for 2011-2012 ranking.The one of best competitiveness indicators is market size, the worst one is technological readiness.The Chinese economy have to improve the global competitiveness indicators which are not in good leveli in order to achieve sustainable economic growth path.Ljungwall and Gustavsson Tingvall (2014) examined whether China has benefited more from spending on R&D than other countries.Their results suggest that the growth-enhancing effect of R&D spending in China has been significantly weaker than that of other countries.Table 7 shows the most problematic factors for doing business for Chinese economy and as follows respectively, access to financing, corruption, tax regulations, inadequate supply of infrastructure, inefficient government bureaucracy, inflation, policy instability, tax rates, insufficient capacity to innovate, restrictive labor regulations, foreign currency regulations, inadequately educated workforce, government instability/coups, poor work ethic in national labor force, crime and theft, poor public health.

Insert Table 7
Source: Klaus Schwab (Edt).The Global Competitiveness Report 2014-2015, World Economic Forum, 2014 Table 8 shows the global competitiveness index indicators in detail for Chinese economy 1-2.Global competitiveness indicators varies in terms of competitive advantage, some of the them are relatively advantageous as follows, institutions such as, public trust in politicians,favoritism in decisions of government officials, wastefulness of government spending, burden of government regulation, infrastructure such as available airline seat, macroeconomic environment such as gross national savings, inflation, general government debt, country credit rating , health and primary education, goods market efficiency, labor market efficiency,financial market development, market size, business sophistication and innovation, but others are relatively disadvantageous for the Chinese economy in the global competition structure.

Conclusion
The Chinese economy has reached approximately average annual growth of 9% after economic reform era that began in 1978.This economic development miracle resulted from by exploiting the economic potential of internal factors in
2.Estimated as a residual.
3.Sum of the balance of the national government and the social security system.
4.Price index for the second-hand market, covering four of the five largest cities in 2007-08 and ten of the largest 13 thereafter.
Average prices have been weighted by the estimated value of the housing stock in each city.

Source: OECD (2013). Economic Surveys CHINA, OECD
The main sources of economic growth in the the Chinese economy are capital and total factor productivity.In this context, it is vital the innovation policy.Figure 2 shows China's innovation policy, institutional reform and learning curve.Innovatiın system in the Chinese economy transformed from state-centered phase into firm-centered system.

Figure 2 .
Figure 2. China's innovation policy: institutional reform and learning curve.Source: OECD (2008).Reviews of Innovation Policy CHINA Synthesis Report, OECD

Figure 4
Figure 4 shows the stage of development and global competitiveness index indicators for Chinese economy.Stage of development is efficiency driven phase 2 for the Chinese economy.On the other hand, the Chinese economy is very strong global competitiveness indicators such as market size, macroeconomic environment, health and primary education considering the Emerging and Developing Asia countries.Global competitiveness level is vital for the sustainable economic growth.In this context the Chinese economy is strong enough to compete with her global competitors.However, the Chinese economy have to increase technological readiness and financial market development indicators.

Figure 4 .
Figure 4. Stage of Development and Global Competitiveness Index Indicators for Chinese Economy Source: Klaus Schwab (Edt).The Global Competitiveness Report 2014-2015, World Economic Forum, 2014 complimentary external environment.The economic liberalization and globalization provide opportunities for the Chinese economy since the 1980s.Chinese policy makers have seized the favourable strategic development period.On the other hand, the global economic and financial crisis that erupted in 2007 hit Chinese exports but swift policy action mitigated the impact on the economy.As a result, year-average growth remained above 9% in 2008-2010.However, in the face of overheating symptoms and sectoral imbalances, corrective action was undertaken in 2011, contributing to a slowdown that was amplified by a weakening and uncertain international environment, so much so that policy reversed gears around mid-2012.Growth troughed at 7.8% in 2012 and is set to regain momentum in 2013-14.For the Chinese Economy, global competitiveness indicators varies in terms of competitive advantage, some of the them are relatively advantageous as follows, institutions such as, public trust in politicians,favoritism in decisions of government officials, wastefulness of government spending, burden of government regulation, infrastructure such as available airline seat, macroeconomic environment such as gross national savings, inflation, general government debt, country credit rating , health and primary education, goods market efficiency, labor market efficiency,financial market development, market size, business sophistication and innovation, but others are relatively disadvantageous for the Chinese economy in the global competition structure.The Chinese economy has strong global competitiveness indicators beside some problematic indicators.The Chinese economy is becoming more competitive by improving bottlenecks and structural problems.On the other hand the Chinese economy have to transform from cheap labourintensive competitive advantage into high-tech innovative country with high qualified human capital in order to achieve sustainable economic growth in the long term.The Economist Intelligence Unit (2014).Report, Economy: Long-term outlook, The Economist Intelligence Unit Wong, J. and Lu Ding.(2002).China's Economy Into the New Century: Structural Issues and Problems, a

Table 2 .
Growth accounting (1) (Average annual rate of change, in per cent ) 1.For output outside agriculture and housing (as the output of the housing sector is poorly measured in Chinese national accounts), figures are calculated from log differences multiplied by 100.

Table 3 .
Subindex Weights and Income Thresholds for Stages of Development See individual country/economy profiles for the exact applied weights.For economies with a high dependency on mineral resources, GDPper capita is not the sole criterion for the determination of the stage of development.See text for details.

Table 4 .
Countries/Economies at Each Stage of Development Klaus Schwab (Edt).The Global Competitiveness Report 2014-2015, World Economic Forum, 2014 Source:

Table 6 .
Global Competitiveness Index Indicators for Chinese Economy

Table 7 .
The Most Problematic Factors for Doing Business for Chinese Economy

Table 8 .
The Global Competitiveness Index Indicators in detail for Chinese Economy