The US has surrendered its status as the world’s most competitive economy after being taken over by Hong Kong and Switzerland, according to the IMD World Competitiveness Center.
The sheer power of the US economy is no longer sufficient to keep it at the top of the prestigious World Competitiveness Ranking, which it has led for the past three years, says the IMD press release.
Despite constant concerns that Hong Kong is losing its edge to mainland and regional rivals, the city has reclaimed the title, it said, CNBC reported.
The annual survey of 61 jurisdictions around the world pushed the city up one place to the top for 2016, saying Hong Kong had “encouraged innovation through low and simple taxation and imposed no restrictions on capital flows”.
In a separate report on competitiveness released Monday by Beijing’s top think tank, the Chinese Academy of Social Sciences, Hong Kong lost out to Shenzhen for the second year in a row.
IMD surveyed more than 5,400 business executives on four main factors–economic performance, government efficiency, business efficiency and infrastructure–while the CASS survey focused on innovation, among other factors.
Hong Kong claimed the top spot in the 2012 IMD rankings, but lost it to the United States for the next three years. Singapore, which ranked fourth in the same survey, was the only other Asian entrant in the top 10 this year.
Business-Friendly Environment
IMD director Professor Arturo Bris said the city’s efforts to create a business-friendly environment had been central to its ability to defy regional challenges.
Bris said Hong Kong was also valued as a gateway for foreign direct investment in the mainland, “the world’s newest economic superpower”, enabling business there to access global capital markets.
In contrast, the US “was no longer able to maintain its dominance”, falling to third in this year’s survey, behind Switzerland.
Despite the city’s grim economic outlook, Hong Kong was helped to the top of the list by worse conditions in other economies, analysts said.
“Hong Kong is doing relatively OK ... Many other places are facing much deeper troubles,” Baptist University associate finance professor Billy Mak Sui-choi said.
Economic Headwinds
Many major Asian jurisdictions and countries, including Taiwan, Malaysia and Indonesia, suffered significant falls from their 2015 positions, dragged down by lower commodity prices, a strong US dollar and deterioration of balance sheets in both the private and public sectors, IMD said.
“Hong Kong is a small and open economy, which enables it to tackle economic headwinds in a more flexible way,” Chinese University lecturer Stephen Wong Yuen-shan said.
Wong said the city managed to climb to the top despite a government that had not done enough to nurture the technology industry and protect labor rights.
“It proves that Hong Kong is a much blessed city,” he said.
But, in the latest annual report on China’s urban competitiveness, the city was again upstaged by rising neighbor Shenzhen.
The CASS report said innovative industries in cities like Shenzhen and Shanghai were booming, which had put some pressure on Hong Kong’s advantaged sectors.
Top Ten
The ranking, now in its 28th year, is based on more than 340 measures of government and business efficiency, economic performance and infrastructure.
The top 10 was rounded out by Singapore, Sweden, Denmark, Ireland, the Netherlands, Norway and Canada.
Australia claimed 17th spot, one place better than last year and ahead of Britain but behind New Zealand.
Australia also improved its performance on a measure of economic resilience, which shows the business community is more confident in the country’s ability to transition from the mining boom.
