|Yougang Chen, McKinsey partner and head of MGI Chin speaks at the report release event in Beijing on Wednesday.(People's Daily Online/Liang Jun)|
May 15, 2014 (Beijing) - China ranks 25 out of 131 countries in a new Global Connectedness Index, according to a new report from the McKinsey Global Institute (MGI) and the McKinsey High Tech Practice - Global flows in a digital age: How trade, finance, people, and data connect the world economy.
"Our research underscores China's leadership position in the global flow of manufactured goods and finance. By further increasing its connectedness in services, data, and people, China has the potential to capture the full benefits of globalization and accelerate the transition of its economy to one that is driven more by innovation and consumption," said Yougang Chen, McKinsey partner and head of MGI China, at an event to publicize the release of the report held in Beijing on Wednesday.
The report looks at flows of goods, services, finance, people, and data and communications. China is very strong in flows of goods and finance, but ranks much lower in flows of people and data and communications, according to the report.
China has become a world leader in flows of goods and finance, where it is ranked 5th and 6th most connected in the world respectively. This is much higher than any other emerging economy, and even higher than most mature economies. This reflects China's role in global manufacturing supply chains and its large inflows of FDI and outflows of central bank reserves, according to the report.
China's total goods, services, and financial flows total 5.1 trillion U.S. dollars, accounting for 20 percent of all global flows and nearly twice China's share of global GDP.
An ever-growing proportion of economic activity takes place across borders. Cross-border flows of goods, services, and finance totaled 26 trillion U.S. dollars in 2012, or 36 percent of global GDP. Relative to the size of the world economy, this was more than 50 percent higher than 20 years ago. Today, these flows contribute between 15 percent and 25 percent of global GDP growth, or about 250 to 450 billion U.S. dollars a year, and could triple in the next decade, according to the report.
The MGI analysis also shows China has become more connected over time and its current ranking is five places higher than in 1995.
Connectedness matters for economic growth, the report finds. Countries that are most connected to these flows enjoy, on average, 40 percent more benefit to growth than countries that are less connected.