China and NZ now level-pegging in global competitiveness stakes

New Zealand has slipped to 25th most competitive economy in the world, while China has edged up to 26th, in a David and Goliath demonstration of the shift in geo-political power that's accelerated since the global financial crisis of 2008.

The 2011 World Economic Forum's Annual Competitive Index, a widely watched barometer of economic vitality, found New Zealand wanting on innovation and business sophistication, dropping two places to 25th in the list of 142 countries surveyed.

Overtaking the kiwis were Malaysia and Israel, while China edged up a spot to 26th place.

Top of the pile was Switzerland, for the third year in a row, while the world's largest economy, the United States, fell one place to fifth on growing concerns over aspects of the institutional environment and growing macro-economic vulnerabilities - the third year in a row the US has lost ground. Australia took a bigger rankings tumbling, falling four places to 20th.

Nordic countries dominated the top 10, with Sweden 3rd, Finland 4th, and Denmark 8th, and Norway was ranked 16th.Canada slipped out of the top ten to 12th, with the United Kingdom taking 10th place. Australia ranked 20th, down four places.

China's ranking is the strongest among the large, developing so-called "BRIC economies". South Africa ranked 50th, Brazil 53rd, India 56th, and Russia, 66th.

"New Zealand's overall performance is limited by innovation and business sophistication, the most important drivers of economic performance in advanced economies," said Rick Boven, executive director of the New Zealand Institute, which released the WEF report to local media.

"Government has increased efforts and investment in innovation but we cannot yet see evidence of improvement. Other countries are doing more" and New Zealand needed to lift its competitiveness - a requirement for creating high value exports - or slip further down the rankings.

New Zealand still scored well on "basic requirements" such as holding top global rankings for the strength of investor protection, probity with public funds, ease of starting a business, and scoring seventh in the quality of both primary education and maths and science education.

New Zealand's rankings in "efficiency enhancers", the second of the three broad categories that make up the index, was also strong, although the quality of rail, road, power and telecommunications was poor at 37th, and impediments to foreign investment ranked the country 56th.

The index ranks the difficulty of hiring and firing people in New Zealand as particularly high compared to other countries, with a ranking of 86th.

Meanwhile, taking all the anticipated costs of the Christchurch earthquakes on the government's books in one year saw the Budget deficit blow out, and took the national ranking on that score from 13th to 112th place.

New Zealand's 28th ranking on innovation and sophistication measures was unchanged from last year, but there remained very weak rankings in government high technology procurement (71st), state of cluster development (60th) and value chain breadth of exporting companies (59th).

Successful countries were improving competitiveness through greater investment and strategic focus on the environment for innovation, and New Zealand needed to do more, despite a recent uplift in investment in the area.

"To illustrate, there is still nowhere in New Zealand offering full-time world class professional training in international marketing and sales to lift the success of our many hundreds of internationalising businesses," Boven said.