- Bloomberg’s New Economy Drivers and Disrupters Report puts the Asian giant at 50th out of 114 economies in terms of preparedness to deal with disruptive forces such as climate change, populism and protectionism
- New Zealand was most ready to handle these disrupters, while Sweden came top in terms of its track record in traditional drivers of growth
29 Oct, 2019
China’s “textbook model” for economic growth saw it become the world’s second-largest economy after opening up in the 1970s, but it is likely to struggle to maintain that pace of growth as it is ill-prepared to deal with major disruptions to the global economy, a new Bloomberg report has said. The New Economy Drivers and Disrupters Report, released on Tuesday, puts the Asian behemoth at 50th place out of 114 economies evaluated in terms of their preparedness to deal with five “disruptive forces”: climate change, populism, protectionism, automation and digitisation.
Unlike traditional indexes, the report featured two sets of rankings – the first measuring an economy’s track record in traditional drivers of growth, and the second for its ability to deal with the five areas of disruption.
While economic giants such as India and China were identified as possible laggards in dealing with disruption, the likes of fast-rising Vietnam and the ultra-wired entrepot of Singapore could be among the handful of Asian players to thrive amid cataclysmic changes to the world economy, the report’s authors said.
China’s economy is slowing, but it has the keys to future growth
China came fourth in the measure comparing the 114 economies across traditional growth drivers such as infrastructure building and investment in research and development.
Tom Orlik, chief economist for Bloomberg Economics, said the inaugural index was created to give policymakers and investors fresh perspective on the trajectory of national economies beyond traditional measures of competitiveness.SUBSCRIBE TO THIS WEEK IN ASIAGet updates direct to your inboxSUBMITBy registering, you agree to our T&C and Privacy Policy
The index’s findings are expected to be vigorously debated at the Bloomberg New Economy Forum, to be held in Beijing from November 20-22.
The enclave of elite businesspeople and politicians – dubbed as the developing world’s rival to Davos – is being held in China for the first time. Its first iteration last year was held in Singapore.
Likening the five disrupters to “asteroids”, Orlik told This Week in Asia the new index offered a projection on which economies “succeed and the challenges [they face] in the next 10 or 20 years”.
With China, the report found its economy was most exposed to risks arising from climate change and protectionism.
China’s involvement in the US-China trade war has made it one of the most vulnerable major economies
The country’s long coastline and the involvement of a large proportion of its people in agricultural activity meant it was far more exposed to the risks of climate change compared with the three other countries in the BRICs bloc of emerging economies: Brazil, Russia and India.In terms of protectionism, the report said China’s involvement in the ongoing tariff war with the US and its own protectionist measures made it “one of the most vulnerable major economies”.
Bloomberg Economics projects the cost of the US-China trade war to reach US$1.2 trillion by 2021, “with the impact spread across the supply chain”.
Where China fits in Jokowi’s plan for Indonesia’s US$33 billion new capital city
In terms of overall exposure to disrupters, India is worse placed than China, coming in at 80th place, while in the area of economic opportunity it looks similar to China at the beginning of its boom, according to the report.
“Favourable demographics and a far-reaching reform agenda have the potential to supercharge growth,” a summary of the report said. However, India faces significant hurdles to draw level with China as in the “age of disruption, late developers will have a more difficult time in catching up”.
Also in focus in the report – co-authored by Bloomberg Economics’ Orlik, Scott Johnson and Alex Tanzi – were the risks arising from populist politics.
The report defined populist rulers as “those who advocate for the common people against corrupt elites, common-sense solutions versus complex policies, and national unity over international engagement”.
By that definition, some 43 per cent of economies in the G20 grouping are now under the control of populist rulers compared with 8 per cent in 2016, it found.
“On the evidence so far, populist rulers are better at identifying problems than they are at finding solutions,” the report said. “The result, in various configurations, has been protectionism, opposition to immigration, unfunded tax giveaways, attacks on central bank independence and head-spinning policy uncertainty.”
High-income countries such as Switzerland, Sweden and Denmark continue to have an advantage in the traditional growth drivers that have been key to China’s economic success, the report said.
Malaysia’s cunning plan for start-up dominance: if you can’t beat them, own them
China tops the ranking for emerging markets, “bolstered by strong investment, support for innovation and considerable scope to raise income toward advanced economy levels”.
Beijing’s economic model – described by Orlik as “all the things a country needs to do in order to develop” – is a tough act to follow, especially for the likes of Russia, Poland and other formerly communist countries.Among the economies featured in the index was Hong Kong, which ranked 20th in terms of harnessing traditional drivers of growth and 34th in preparedness to handle disrupters.
Singapore was ranked 18th in the traditional drivers index and seventh in the disrupters index.
New Zealand ranked No 1 in the disrupters index, followed by Australia, Sweden, Finland and Denmark.
Sweden was top of the traditional drivers index, and was followed by Switzerland, Denmark, China and Australia.This article appeared in the South China Morning Post print edition as: economic giants ‘not ready for disruption’