Services Trade Between China and the World: Untapped Opportunities
The relationship between China and the world is now changing. A new exposure index from the McKinsey Global Institute (MGI) shows that the world’s relative exposure to China has increased, while China’s exposure to the world has decreased. Changing Exposure Between China and the World From 2000 to 2017, the world’s exposure to China increased across all three dimensions, while China’s exposure decreased. The world’s total exposure index rose from 0.4 in 2000 to 1.2 in 2017, while China’s exposure to the world peaked at 0.9 in 2007 and fell to 0.6 in 2017. China’s Integration into Technology Value Chains China is a global force in the global digital economy and artificial intelligence technologies. In many types of technology, it is already the largest consumer (for example, China accounted for 40% of global mobile phone sales in 2017, 64% of electric vehicle sales, and 46% of semiconductor consumption). China’s Rapidly Expanding Consumer Market China’s rapidly expanding consumer market – confident, increasingly wealthy, sophisticated, and ready to experiment – provides a strong link between China and the world. By 2030, 58% of Chinese households are likely to be in the wealthiest or higher category, exceeding South Korea’s current share of 55%. Chinese consumer markets are highly integrated with the world: Across ten major consumer categories, the average penetration of multinational companies was 40% in 2017, compared to only 26% in the United States. Two trends present significant business opportunities: Potential Value at Risk Simulation results indicate that more or less engagement between China and the world in five areas could drive economic value for the world ranging from $22 to $37 trillion by 2040. Five Options for More or Less Engagement: Recommendations for Companies: