Despite being hit by the COVID-19 pandemic, China’s economy expanded by 2.3 percent in 2020. The government effectively controlled the spread of the coronavirus through strict lockdowns and other social distancing measures. Fewer face-to-face activities also led to increased online activities and, therefore, a burgeoning digital economy. For the successes it achieved despite a health crisis, China’s economy in 2020 becomes a uniquely interested research subject.

Into its eighth edition, this sub-national competitiveness series on Greater China delivers an annual update of rankings and zooms in on the COVID-19 impact and implications.

Key Highlights

• Guangdong has maintained itself as the most competitive economy since 2010. The economy’s strengths in Openness to Trade and Services, Government Policies and Fiscal Sustainability, Financial Deepening and Business Efficiency, and Physical Infrastructure underlie its top position.
• Tibet has remained at the bottom for the same periods, with Institutes, Governance and Leadership being its most notable weakness. However, even if Tibet ranks last, it does not lag too far behind a middle performer. For example, Tibet’s most competitive sub-environment, Labour Market Flexibility, is just 0.24 standard deviations away from the median.
• The competitiveness ranking indicates persistent regional disparity over the years. Economies in the eastern regions have dominated, one key reason being the unbalanced distribution of natural resources. For instance, natural ports along the eastern coastline enable trade in volumes that inland provinces cannot match.
• By the What-If simulation method, the study further explores each province’s potential improvement in rankings if it overcomes its weaknesses. Through the simulation, 11 economies demonstrate major potential for improvement, with Tibet, Qinghai and Guangxi possibly improving by 14 to 16 ranks.

Case Study

Guizhou emerges as one of the few economies showing the most significant improvement (up three places) in the ranking this year. A dedicated case study of Guizhou finds that its rise in competitiveness may be attributed to: (1) its construction of highways to strengthen intra-region connections; (2) the development of attractions such as Huangguoshu Waterfall to attract tourists; and (3) the hosting of data centres for technology giants, leveraging its cool climate. If it builds further on these areas, Guizhou’s rank is projected to increase by to three more places.

Impact of COVID-19 on Secondary and Tertiary Sectors

The novel contribution in this book is the empirical assessment of the impact of COVID-19 on China’s secondary and tertiary sectors. The study constructs a trimmed-down competitiveness index focusing on manufacturing, industry, construction and services from Q4 2019 to Q2 2020. The rankings show a shuffle of positions, likely indicating uneven influence of the coronavirus on sub-national economies.

By ZHANG Xuyao, Mao KE, and ZHU Yan