Last week we published our “Globalization Report 2020” which considers a sample of European countries as well as other major economies from around the globe. Today we look at all the five Asian economies that are examined in our report: Japan, South Korea, China, India, and Indonesia.

Japan, South Korea, China, India, and Indonesia are below-average in the Globalization Index

The degree of international interdependence of the Asian countries included in our Globalization Report and measured by its Globalization Index is not particularly pronounced in comparison to all 45 countries we looked at.

Japan as the “globalization champion” in 2020 – measured as the amount of money gained per capita induced by globalization – achieves the highest value of Asian countries here. India ranks last. The country is only slightly integrated into international trade flows.

Even the increases in globalization between 1990 and 2018 are only moderate. The median of the Globalization Index (the index value of the country ranking 23rd and thus in the middle of the ranking) has risen from around 42 index points in 1990 to around 63 index points in 2018 (plus 21 index points). In South Korea and Indonesia, the increase was slightly higher than this. In China and India, it was lower (see Figure 1).

chart globalization

The low ranks of Asian countries from our sample of 45 countries are mainly due to the low levels of economic integration with the rest of the world. The reasons for this are still existing trade barriers and capital controls. It should also be noted that for reasons of international comparability, the economic indicators under review are always set in relation to the country’s GDP.

This means as an example, that China’s exports in relation to GDP – as it is the case in the USA – are only in one of the last ranks. The low level of economic global interdependence is particularly noticeable because it is weighted with 60 percent of the total globalization index. Solely in political globalization countries from Asia do perform slightly better (see Figure 2).

chart globalization

Globalization-induced GDP growth per capita is much higher in Japan than in India

With the help of regression analyses, the Globalization Report calculates the influence of a change in the value of the Globalization Index on income gains in terms of real GDP per capita.

All 45 countries considered were able to achieve globalization-induced GDP gains. However, the figures vary considerably (see Figure 3): The largest average income gains per inhabitant and year are recorded in Japan (around EUR 1,790) and Ireland (around EUR 1,610). At the bottom are the major emerging markets, including China, Indonesia, and India. South Korea ranks tenth – as it did in the Globalization Report 2018.

chart globalization

The result may seem surprising for China, whose development has been significantly shaped by globalization in recent decades. But it shows that China’s globalization-induced income gains may be large in absolute terms while distributed among over one billion people the average income gains are still quite small.

There are three main reasons for these differences: Firstly, the starting level of GDP per capita in 1990. Secondly, the extent to which globalization has changed over the period under consideration. Thirdly, the timing of the increases in the globalization index.

Globalization gains above average in relation to the starting level in India, Indonesia, and China

However, the fact that the absolute income gains in GDP induced by globalization in India, Indonesia, and China are relatively low by international standards does not mean that globalization is unimportant for these countries.

On the contrary, if the cumulative income gains expressed in euro are set in relation to the starting level of real GDP per capita, the ranking of the countries with the highest income gains changes significantly (see Figure 4):

  • The cumulative globalization-induced gains in real GDP per capita between 1990 and 2018 amounts to around EUR 2,660 for China. Compared to all 45 countries, China thus only ranks 42nd.
  • However, if this amount of money is compared with China’s real GDP per capita in 1990 – which was 430 euros – the cumulative monetary advantage from globalization represents just under 620 percent of its 1990 GDP level. This is by far the highest value of all 45 countries. South Korea follows in second place with around 370 percent.

chart globalization

China and South Korea show innovatory power

The good performance of China and South Korea is no accident. They have established a strong position in the global innovation scene, particularly in the last decade. Measured by the 10% best active patents in 58 future technologies in the period from 2000 to 2019, they have been able to steadily increase their share.

This should ensure that China and South Korea remain highly competitive in the future as well, which means that these two countries should continue to benefit strongly from globalization.

More detailed information on the “Globalization Report 2020” can be found in our Policy Brief and in the full study.

Here you can download the previous versions of our Globalization Report: