Australia leads but China is the big mover in terms of the development of its business growth environment according to the Grant Thornton Global Dynamism Index (GDI) 2013. New Zealand is ranked an improving fourth.
Developed in conjunction with the Economist Intelligence Unit, the GDI ranks 60 of the world's largest economies on 22 indicators across five categories of dynamism, that indicate changes in an economy which are likely to lead to a faster future rate of growth. The five categories include business operating environment, science and technology, labour and human capital, financing environment and economics and growth.
The findings show that China ranks third globally, behind Australia and Chile. China has risen 17 places from this time last year, largely driven by increases in R&D, IT spending and labour productivity.
Greg Thompson, partner at Grant Thornton New Zealand, commented: “Growth in China is slowing as the new leadership rebalances the economy away from exports and investment towards a more sustainable, consumption-driven model of growth. However, the positive news is that this is not dampening business expansion prospects. The GDI shows increasing science and technology activity, which will help sustain economic growth potential by boosting the quality, productivity and efficiency of outputs.
“China is not only a massive market, but it is also developing fast and has other factors in its favour. Ten years ago cheap labour was a draw for business leaders but wages have risen and the emergence of the Chinese consumer offers a different type of opportunity. Foreign business leaders are now looking to invest in order to sell locally rather than export back. The index shows that the Chinese Government still has work to do to improve rules and regulations but the growth opportunities are too big to ignore.
“Australia is totally different. Yes, it is No.1 in having the platform for future business growth but in the short term factors such as falling business confidence, a mining sector under pressure and the political cloud from three years of apparent election campaigning may stall this growth.
“In comparison, New Zealand has many factors in its favour including record high levels of business confidence, strong export markets and a stable economic environment. However, our lack of investment in R&D and IT technology is holding us back,” he said.
China’s performance is in stark contrast to the other BRIC (Brazil, Russia, India) economies which have all fallen down the rankings this year. Brazil slid eleven places to rank 42; Russia fell three places to rank 43; and India dropped six places to 48.
Thompson added: “The index suggests the BRICs are no longer travelling together. All have slowed over recent months, but it appears China is handling this transition most effectively – certainly as far as prospects for business growth are concerned. The challenge for the other BRICs is to manage the challenges the index reveals and develop their attractiveness to dynamic businesses.
"The Brazilian economy grew by just 0.9% in 2012 and the popular unrest we saw during the Confederations Cup is a symptom of slowing growth, rising inflation and the end of the credit and commodity-fuelled boom. The government has promised greater political transparency but economic policy remains confusing for investors. India is caught between a falling rupee and slowing growth and has enacted a raft of reforms, including opening up key sectors to foreign investment. Russia remains heavily reliant on global commodity prices and the government recently announced a package of economic measures including a range of infrastructure investments and breaks for small and medium-sized businesses."
Greg Thompson
Partner, Tax and Privately Held Business
D +64 4 495 3775
E greg.thompson@nz.gt.com