Markets
Which Asian Economies Have the Most Sustainable Trade Policies?
Which Asian Economies Have the Most Sustainable Trade Policies?
To say that Asia has benefited from international trade is an understatement. By opening its economies to the rest of the world, the region has become a leading exporter in many of today’s most important industries.
Trade has also improved Asia’s quality of life, lifting over one billion people out of poverty since 1990. Without the proper controls, however, such rapid growth could have harmful effects on Asia’s environment and society.
In this infographic from The Hinrich Foundation, we break down the results of their 2020 Sustainable Trade Index (STI). Since 2016, this index has ranked 19 Asian economies and the U.S. across three categories of trade sustainability: economic, social, and environmental.
What Exactly is Sustainable Trade?
International trade is an important source of economic growth, enabling domestic businesses to expand, reach new customers, and gain exposure to foreign markets.
At the same time, countries that focus too heavily on exports put themselves at greater long-term risk. For example, an aggressive expansion into manufacturing is likely to impair the quality of a country’s air, while overdependence on a single product or sector can create an economy that is susceptible to demand shocks.
“The primary principle which underpins sustainable trade is balance. Trade cannot be pursued solely for economic gains, without considering environmental and social outcomes.”
– Merle A. Hinrich
Thus, sustainable trade supports not only economic growth, but also environmental protection and strengthened social capital. It involves finding a balance between short-term incentives and long-term resilience.
Measuring Sustainable Trade
The Sustainable Trade Index (STI) is based on three underlying pillars of trade sustainability. Every economy in the STI receives a score between 0 and 100 for each pillar.
Pillar | Number of Indicators | Examples of Indicators |
---|---|---|
Economic pillar | 21 |
|
Social pillar | 12 |
|
Environmental pillar | 14 |
|
The economic pillar measures a country’s ability to to grow its economy through trade, while the social pillar measures a population’s tolerance for trade expansion, given the costs and benefits of economic growth.
Last but not least, the environmental pillar measures a country’s proficiency at managing climate-related risks. Individual pillar scores are then aggregated to arrive at an overall ranking, which also has a maximum possible score of 100.
The Sustainable Trade Index 2020: Overall Rankings
For the first time in the STI’s history, Japan and South Korea have tied for first place. Both countries have placed in the top five previously, but 2020 marks the first time for either to take the top spot.
Rank | Economy | Overall Score |
---|---|---|
1 (tied) | 🇯🇵 Japan | 75.1 |
1 (tied) | 🇰🇷 South Korea | 75.1 |
3 | 🇸🇬 Singapore | 70.2 |
4 | 🇭🇰 Hong Kong | 68.3 |
5 | 🇹🇼 Taiwan | 67.0 |
6 | 🇺🇸 U.S. | 66.2 |
7 | 🇨🇳 China | 56.5 |
8 | 🇵🇭 Philippines | 55.9 |
🌏 Average | 55.1 | |
9 | 🇹🇭 Thailand | 50.5 |
10 | 🇱🇰 Sri Lanka | 50.4 |
11 | 🇲🇾 Malaysia | 49.5 |
12 | 🇧🇩 Bangladesh | 49.4 |
13 | 🇧🇳 Brunei | 48.5 |
14 | 🇰🇭 Cambodia | 47.8 |
15 (tied) | 🇮🇳 India | 46.9 |
15 (tied) | 🇻🇳 Vietnam | 46.9 |
17 | 🇮🇩 Indonesia | 46.3 |
18 | 🇱🇦 Laos | 46.1 |
19 | 🇵🇰 Pakistan | 43.9 |
20 | 🇲🇲 Myanmar | 40.3 |
Advanced economies like Singapore, Hong Kong, and Taiwan were also strong performers, each scoring in the high 60s. At the other end of the spectrum, developing countries such as India and Vietnam were tightly packed within the 40 to 50 range.
To learn more, here’s how each country performed in the three underlying pillars.
1. Economic Pillar Rankings
Hong Kong topped the economic pillar for the first time thanks to its low trade costs and well-developed financial sector. Financial services have increased their contribution to Hong Kong’s GDP from 13% in 2004 to 20% in 2018.
The region’s recently initiated national security law—which has resulted in greater political instability—may have a negative effect on future rankings.
Rank | Economy | Economic Score |
---|---|---|
1 | 🇭🇰 Hong Kong | 69.6 |
2 | 🇸🇬 Singapore | 68.7 |
3 | 🇨🇳 China | 64.9 |
4 | 🇰🇷 South Korea | 63.3 |
5 (tied) | 🇲🇾 Malaysia | 61.2 |
5 (tied) | 🇺🇸 U.S. | 61.2 |
7 | 🇹🇼 Taiwan | 60.3 |
8 | 🇧🇳 Brunei | 59.3 |
9 (tied) | 🇯🇵 Japan | 58.6 |
9 (tied) | 🇵🇭 Philippines | 58.6 |
🌏 Average | 56.9 | |
11 | 🇧🇩 Bangladesh | 56.3 |
12 | 🇰🇭 Cambodia | 56 |
13 | 🇱🇰 Sri Lanka | 54.7 |
14 | 🇻🇳 Vietnam | 53.9 |
15 | 🇮🇩 Indonesia | 52.1 |
16 | 🇮🇳 India | 51.4 |
17 | 🇲🇲 Myanmar | 49.5 |
18 | 🇹🇭 Thailand | 47.4 |
19 | 🇵🇰 Pakistan | 46.9 |
20 | 🇱🇦 Laos | 44.0 |
China was also a strong performer, climbing to third for the first time. Asia’s largest economy benefits from a well-diversified group of trading partners, meaning it doesn’t rely too heavily on a single market.
The bottom five countries—India (16th), Myanmar (17th), Thailand (18th), Pakistan (19th) and Laos (20th)—suffered from issues such as payment risk, which is measured as the difficulty of getting money in and out of a country. This risk is especially damaging to trade because it discourages foreign direct investment.
2. Social Pillar Rankings
The social pillar features the highest average score, but also the largest gap from top to bottom. This gap has expanded over recent years, growing from 43.9 points in 2018 to 52.3 in 2020.
Rank | Economy | Social Score |
---|---|---|
1 | 🇹🇼 Taiwan | 88 |
2 | 🇯🇵 Japan | 87.3 |
3 | 🇰🇷 South Korea | 86.9 |
4 | 🇺🇸 U.S. | 83.1 |
5 | 🇸🇬 Singapore | 63.1 |
6 | 🇵🇭 Philippines | 62.4 |
7 | 🇹🇭 Thailand | 60.9 |
🌏 Average | 59.1 | |
8 | 🇭🇰 Hong Kong | 57.8 |
9 | 🇧🇩 Bangladesh | 55.8 |
10 | 🇲🇾 Malaysia | 53.6 |
11 | 🇱🇦 Laos | 53.0 |
12 | 🇮🇳 India | 52.5 |
13 | 🇮🇩 Indonesia | 52.4 |
14 | 🇧🇳 Brunei | 51.6 |
15 | 🇻🇳 Vietnam | 50.4 |
16 | 🇨🇳 China | 50.2 |
17 | 🇰🇭 Cambodia | 46.2 |
18 | 🇱🇰 Sri Lanka | 46.1 |
19 | 🇵🇰 Pakistan | 45.6 |
20 | 🇲🇲 Myanmar | 35.7 |
Taiwan claimed the top spot for the second time, solidifying its reputation as Asia’s leader in human capital development. It performed well in the educational attainment indicator, with 93.6% of its population receiving a tertiary education.
China, despite its success in other pillars, only managed 16th. This was partly due to the effects of its now defunct one-child policy, which has been responsible for creating gender imbalances and a shrinking population.
3. Environmental Pillar Rankings
The environmental pillar has the lowest average score of the three. Japan, Singapore, Hong Kong, and South Korea were the only countries to score above 75.
Rank | Economy | Environmental Score |
---|---|---|
1 | 🇯🇵 Japan | 80.0 |
2 | 🇸🇬 Singapore | 78.7 |
3 | 🇭🇰 Hong Kong | 77.4 |
4 | 🇰🇷 South Korea | 75.2 |
5 | 🇨🇳 China | 54.5 |
6 | 🇺🇸 U.S. | 54.3 |
7 | 🇹🇼 Taiwan | 52.8 |
8 | 🇱🇰 Sri Lanka | 50.4 |
🌏 Average | 49.1 | |
9 | 🇵🇭 Philippines | 46.6 |
10 | 🇹🇭 Thailand | 43.2 |
11 | 🇰🇭 Cambodia | 41.2 |
12 | 🇱🇦 Laos | 41.1 |
13 | 🇵🇰 Pakistan | 39.3 |
14 | 🇮🇳 India | 36.7 |
15 | 🇻🇳 Vietnam | 36.3 |
16 | 🇧🇩 Bangladesh | 36.0 |
17 | 🇲🇲 Myanmar | 35.6 |
18 | 🇧🇳 Brunei | 34.6 |
19 | 🇮🇩 Indonesia | 34.3 |
20 | 🇲🇾 Malaysia | 33.8 |
The top four performed well in areas such as air quality and water pollution, and with the exception of Hong Kong, have all introduced carbon pricing schemes in the past decade. This doesn’t mean these countries are without their flaws, however.
Land-constrained Singapore, for instance, ranked 16th in the deforestation indicator. The city-state is one of the densest population centers in the world, and has cut down forests to clear space for further settlement and urbanization.
Building Back Better From COVID-19
Despite the damage that COVID-19 has caused, there are some silver linings. This includes the environmental benefits experienced by China, where lockdowns reduced carbon emissions by 200 million tonnes in a single month. It’s been estimated that after two months, China’s reduced pollution levels saved the lives of 77,000 people.
These temporary improvements are an explicit reminder of the environmental and social costs associated with economic growth. In response, governments in Asia are taking steps to ensure the long-term sustainability of their nations. Japan and South Korea both announced their commitments to achieving carbon neutrality by 2050, while China set a similar goal for 2060.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
---|---|---|
EURO STOXX 50 | 14.9 | 2.2 |
STOXX Europe 600 | 14.4 | 2 |
U.S. | 25.9 | 4.7 |
Canada | 16.1 | 1.8 |
Japan | 15.4 | 1.6 |
Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
---|---|---|---|---|---|---|
EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
Canada | 1.00 | 0.22 | 0.40 | |||
Japan | 1.00 | 0.88 | ||||
Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
Index | Description | Market Cap |
---|---|---|
STOXX Europe 600 | Pan-regional, broad market | €10.5T |
STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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