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The World’s Most Innovative Economies

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Ranked: The World's Most Innovative Economies

The World’s 10 Most Innovative Economies

In the 21st century, innovation has become the heart and soul of economic policy. Developed and developing nations alike are in the race to leave industrialization behind, adapting instead to technology-focused, entrepreneurial societies.

Customized cancer treatment, faux meat products, and the smart home technologies are frequently positioned as ‘the next big thing’. But which countries are consistently innovating the most?

Today’s graphic comes from the seventh annual Bloomberg Innovation Index and highlights the 10 most innovative economies, and the seven metrics used to rank 2019’s top contenders.

Measuring Innovation

Bloomberg calculated each country’s innovation score using seven equally-weighted metrics.

  1. R&D Spending
    All research and development funding invested in an economy each year.
  2. Patent Activity
    Number of domestic patents filed, total patent grants, patents per population, filings per GDP, and total grants awarded measured against the global total.
  3. Tertiary Efficiency
    Total enrollment at post-secondary institutions, graduation levels, and number of science and engineering graduates.
  4. Manufacturing Value-added
    Manufacturing output levels that contribute to exports and domestic economic growth.
  5. Productivity
    Overall productivity levels of the working-age population.
  6. High-tech Density
    Number of domestic high-tech public companies, measured against the number of domestic public companies and the global total of public high-tech companies.
  7. Researcher Concentration
    Number of professionals currently engaged in research and development roles.

More than 200 countries were initially considered for Bloomberg’s Innovation Index. Any country reporting in less than six categories was automatically eliminated, leaving 95 countries remaining. Bloomberg publishes the results for the top 60 most innovative economies each year.

Notable Countries in the Top 60

The U.S. rejoined the top 10 after dropping to 11th in 2018 for low scores in education. Israel moved up five spots to 5th place, while Romania made the largest overall gain, jumping six spots to rank in the top 30.

2019 RankEconomyTotal ScoreChange in Ranking
#1🇰🇷 South Korea87.380
#2🇩🇪 Germany87.32
#3🇫🇮 Finland85.574
#4🇨🇭 Switzerland85.491
#5🇮🇱 Israel84.785
#6🇸🇬 Singapore84.49-3
#7🇸🇪 Sweden84.15-5
#8🇺🇸 United States83.213
#9🇯🇵 Japan81.96-3
#10🇫🇷 France81.67-1
#11Denmark81.66-3
#12Austria80.980
#13Belgium80.431
#14Ireland80.08-1
#15Netherlands79.541
#16China78.353
#17Norway77.79-2
#18United Kingdom75.87-1
#19Australia75.38-1
#20Canada73.652
#21Italy72.85-1
#22Poland69.1-1
#23Iceland68.411
#24New Zealand68.12-1
#25Czech Republic68.093
#26Malaysia67.610
#27Russia66.81-2
#28Luxembourg66.374
#29Romania64.786
#30Spain64.52-1
#31Slovenia64.11-
#32Hungary63.05-5
#33Turkey62.890
#34Portugal62.79-4
#35Greece62.05-4
#36Estonia61.790
#37Lithuania59.73-3
#38Hong Kong58.9-1
#39Slovakia58.03-1
#40Thailand57.775
#41Bulgaria56.360
#42Latvia55.46-2
#43Malta55.43-4
#44Croatia54.98-2
#45Brazil53.62-
#46U.A.E.52.93-
#47Iran52.812
#48Cyprus52.05-1
#49Serbia51.35-5
#50Argentina51.31-
#51South Africa51.03-3
#52Tunisia48.92-9
#53Ukraine48.05-7
#54India47.93-
#55Kuwait47.27-
#56Saudi Arabia47.18-
#57Qatar46.58-
#58Chile46.4-
#59Mexico46-
#60Vietnam45.92-

Brazil rejoined the list at number 45, after not being included on the 2018 list. The United Arab Emirates made the list for the first time, marking the highest debut ever at number 46.

Tunisia and Ukraine were the two countries with the largest losses, which both fell out of the top 50 this year. To date, South Africa is the only Sub-Saharan nation to be ranked in the index.

Newcomers to the Innovation Index in 2019 are some of the largest emerging economies, such as India, Mexico, Vietnam, and Saudi Arabia.

Impact of Global Innovation

Innovation is complex─many factors play a role in the ideation, development, and commercialization of any new technology. And while innovation success can fuel economic growth, it is generally more accessible in high-income economies, where R&D funding is readily available.

“The battle for control of the global economy in the 21st century will be won and lost over control of innovative technologies.”

—Tom Orlik, Bloomberg Economics

The focus of an economy that prioritizes innovation, however, is not simply allocating resources for a group of people─it’s discovering new methods, models, and products that create a better quality of life for society.

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An Investing Megatrend: How Emerging Wealth is Shaping the Future

Emerging markets are ascending on the global stage and wielding more economic power—and it’s drastically altering the investment landscape.

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Globalisation is a rising tide that lifts all boats.

In an increasingly connected world, countries are engaging with global markets more than ever before. As a result, global wealth is shifting towards emerging markets. This megatrend—a global trend with sustained impacts—is profoundly influencing everyday life, society, and business.

Shifting Economic Power

Today’s infographic from iShares by BlackRock explains how emerging markets are classified, along with which countries are growing the fastest—and how investors can follow the money.

BlackRock-Emerging-Markets Global Wealth

What Is An Emerging Market?

Every economy goes through five distinct stages of growth:

  1. Traditional Society: Based on primary industries, such as subsistence farming.
  2. The Pre-Conditions of Take-off: Spread of technology creates a more productive agricultural economy.
  3. Take-off: Industrialisation begins, and technological breakthroughs occur.
  4. Drive to Maturity: More complex manufacturing, and large-scale infrastructure investment takes place.
  5. Age of Mass Consumption: Urban society and a tertiary industry dominate, as disposable income grows.
  6. Source

    Emerging markets fall into the transitory stages between ‘Take-off’ and ‘Drive to maturity’ as their economies modernise. Today, such countries offer lots of promise, but also come with a range of challenges:

    • Pro: Greater return potential, growing middle class, increasing consumption
    • Risk: Political instability, lack of infrastructure, lack of market access

    Between 2000–2018, emerging markets’ share of global wealth has more than doubled from 10% to 24%. China is a major player in this transformation.

    China’s Economic Might

    China’s impressive trajectory from agricultural economy to global superpower cannot be ignored. The nation is on track to overtake the U.S. in terms of gross domestic product (GDP, nominal) by the year 2030.

    Year🇨🇳 China GDP🇺🇸 U.S. GDP
    2000$2.2T$12.6T
    2010$6.1T$15T
    2018$10.8T$17.8T
    2020E$16T$20.2T
    2030E$26.5T$23.5T
    2040E$36.6T$28.3T
    2050E$50T$34.1T

    China’s enormous growth has a ripple effect on its GDP composition. A more affluent middle class is buying higher-priced discretionary goods—such as cars and electronics—boosting the country’s domestic consumption.

    Investors must keep an eye out for other emerging markets that are emulating China’s example.

    One Piece Of the Puzzle

    China is just one case study—several other economies are also making strides on the world stage. Each country brings unique advantages, but also barriers to overcome.

    CountryReal GDP Growth (2019E)StrengthsWeaknesses
    🇮🇳 India7.4%✔ Rapidly growing economy
    ✔ Vast working-age population
    ✘ Red tape
    ✘ Lack of infrastructure
    🇨🇳 China6.2%✔ Good infrastructure
    ✔ High R&D spending
    ✘ Ageing population
    ✘ High debt
    🇮🇩 Indonesia5.1%✔ Cheap labour
    ✔ Diversifying economy
    ✘Wide income gap
    ✘ Lack of infrastructure
    🇲🇽 Mexico2.5%✔ Integrated with global economy
    ✔ Cheap and qualified labour
    ✘ Political unrest
    ✘ Reliant on U.S. ties
    🇧🇷 Brazil2.4%✔ Diversifying economy
    ✔ Strategic location
    ✘ High production costs
    ✘ Inflation
    🇳🇬 Nigeria2.3%✔ High FDI
    ✔ Diversifying economy
    ✘ Political unrest
    ✘ Lack of infrastructure
    🇷🇺 Russia1.8%✔ Natural resources
    ✔ Educated workforce
    ✘ Political unrest
    ✘ Lack of FDI
    🇹🇷 Turkey0.4%✔ Cheap labour
    ✔ Strategic location
    ✘ Political unrest
    ✘ Red tape

    Source: Global Finance Magazine

    With these major emerging markets in mind, how can investors tap into the global wealth shift?

    Where Are the Opportunities?

    There are several avenues for an investor to play into this megatrend: structural solutions, consumer goods, and international investment.

    Structural solutions

    Emerging markets are increasingly gaining access to technology. Growth in connectivity is closely linked with improved productivity, and many countries are ripe for a surge in online users.

    However, much can still be done to speed up technological adoption, such as boosting 3G/4G network volume and coverage, and lowering the cost of data and smartphones to be more economical.

    By helping solve some of these structural constraints through technological innovation, investors can tap into the economic growth of emerging markets.

    Consumer goods

    As disposable income increases, a sizeable middle class will seek out products that elevate the quality of life. In India, domestic consumption is estimated to hit $6 trillion by 2023—four times its 2018 level.

    The region’s spending will likely be propelled by higher-priced goods, as well as a wider variety of choices across food, transport, and fitness categories.

    Global brands that plan to expand into emerging markets, or companies with a proven track record in these areas, are potential winners for investment.

    International investment

    Last but not least, investors can identify local winners in emerging wealth markets, through active or passive investing.

    An active investment strategy would be to directly buy into individual company stocks, listed on a country’s stock exchange. Meanwhile, a passive investing strategy would be to seek out exchange-traded funds (ETFs) covering specific markets, and/or sectors within emerging markets. Many of these are also listed on major exchanges.

    Diversifying either or both strategies across two or more countries can help mitigate risk. Investors can also choose index funds that broadly encompass all emerging markets.

    As countries climb the economic ladder, the emerging wealth shift continues to gain momentum. By staying attuned to these macro changes, investors may unlock long-term growth from emerging markets.

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Visualized: Ranking the Goods Most Traded Between the U.S. and China

This infographic ranks the top 10 exports and imports of the U.S. and China, the two most significant global economic superpowers today.

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Most Traded Goods U.S. and China

The Most Traded Goods Between the U.S. and China

From a young age, many of us were taught that sharing is caring.

Many countries have also followed this simple principle, in the interest of growth and prosperity, when doing business on a global scale.

Today’s infographic from HowMuch.net charts the top imports and exports between the U.S. and China, pulled from the Observatory of Economic Complexity’s (OEC) global market data for 2017.

Which items do you find most surprising?

Give and Take: The Trade Relationship of the U.S. and China

Two of the world’s largest superpowers today, the U.S. and China have typically had a long-standing trade relationship going back decades.

The table below shows the top 10 exports the U.S. sent to China in 2017, along with the proportion of each item in the total export value of $132 billion. The top 10 items account for 39% of total exports to China.

The Top 10 Exports from the U.S. to China (2017)

ItemsValue (US$B)% of Total Exports
Aeroplanes and other aircraft$13.19.9%
Soya beans$12.59.4%
Vehicles with only spark-ignition internal
combustion reciprocating piston engine
$7.96.0%
Electronic integrated circuits; Processors and controllers$4.93.7%
Oils$4.03.0%
Gold$2.11.6%
Machines and apparatus for the manufacture of semiconductor
devices or of electronic integrated circuits
$1.91.5%
Vehicles for transport of persons$1.91.4%
Petroleum gases and other gaseous hydrocarbons$1.71.3%
Copper$1.61.2%

While the majority of these are highly specialized, manufactured products─such as airplanes, integrated circuits, and semiconductors─the U.S. still relies on exporting many basic commodities such as gold, copper, and soya beans.

Below is the list of the top 10 imported products from China, and the percent that each product accounts of the total $444 billion in 2017. These top 10 items make up 30% of all products imported from China.

The Top 10 Imports from China to the U.S. (2017)

ItemsValue (US$B)% of Total Imports
Telephones for cellular networks or for other wireless networks$43.79.8%
Automatic data processing machines$37.28.4%
Trycicles, scooters and similar wheeled toys & other toys$12.32.8%
Communication apparatus$11.32.5%
Games; articles for funfair$5.41.2%
Other Monitors$4.71.1%
Units of automatic data processing machines$4.41.0%
Electrical static converters$4.61.0%
Seats$4.31.0%
Reception apparatus for television$4.20.9%

China is best known for its electronics and technology-focused products─with electronics products accounting for two-thirds of the top 10 Chinese imports. In 2017, China also dominated all electronics imports into the U.S., claiming over 60% of the market.

But how has the recent trade war impacted the imports and exports between the U.S. and China?

The U.S.-China Trade War Continues

At one point, China was the United States’ top trading partner in terms of the total value of imports and exports. Since the trade war began in 2018, China has fallen to third place.

For example, soybean exports to China in 2019 are predicted to only reach a third of numbers seen in 2018, and the price of this commodity has been nearly cut in half.

In the first nine months of 2019 alone, the U.S. saw a 13.5% drop in imported products from China, due to actual and threatened increased tariffs. In addition, U.S. exports to China dropped by 15.5%─a significant loss of $53 billion.

The Future of U.S.-China Trade

To date, the U.S. has enacted tariffs on over $550 billion worth of imported products from China. In response to the U.S. tariffs, China has added tariffs to $185 billion worth of exported goods from the United States.

With the 2020 U.S. presidential election looming on the horizon, threats of increased tariffs seem to dominate headlines internationally. If these trends continue, many U.S. businesses—both at home and abroad in China—could find their bottom lines threatened by rising trade costs.

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