The world’s two biggest economies have become less competitive due to their ongoing trade war, which seems to have no short-term resolution in sight.
Both China and the US have slipped down the World Competitiveness Rankings for this year.
Smaller economies including Singapore, Denmark and Switzerland top the list.
The Institute for Management Development (IMD) survey said their handling of the coronavirus pandemic helped strengthen their positions.
The US, the world’s biggest economy, slipped seven places to 10th, while China fell six places to 20th. The two economic superpowers have been locked in a trade war since 2018 with import taxes (tariffs) imposed on a wide range of goods.
The trade war has increased uncertainty for businesses, a factor weighing on both countries’ competitiveness. “Trade wars have damaged both China and the USA’s economies, reversing their positive growth trajectories,” the IMD said in its report.
Singapore was the most competitive economy for the second year in a row, followed by Denmark and Switzerland. The Netherlands and Hong Kong complete the top five highest ranking economies.
“The benefit of small economies in the current crisis comes from their ability to fight a pandemic and from their economic competitiveness,” said Arturo Bris, director at the IMD. “In part, these may be fed by the fact it is easy to find social consensus.”
The IMD rankings assess 63 economies on hundreds of factors including employment, cost of living and government spending. It also includes surveys of executives on topics such as political stability and protection of intellectual property rights.
The UK climbed four spots to 19th, which could be a sign that Brexit has created the perception of a business-friendly environment, said the IMD.
Asia-Pacific economies have generally weakened in terms of competitiveness with most slipping from last year’s rankings. Japan dropped four places to 34th although India remained in 43rd spot.