source: McKinsey
interdependent world, connected by global flows of goods, services, capital, people, data, and ideas. Global value chains have been built on these flows, creating a more prosperous world.
The world remains deeply interconnected, and flows have proved remarkably resilient during the most recent turbulence. Furthermore, no region is self-sufficient. The challenge therefore is to harness the benefits of interconnection while managing the risks and downsides of dependency—particularly where products are concentrated in their places of origin.
flows driving global integration and an assessment of interdependency and concentration risks and the important role of multinational corporations.
flows linked to knowledge and know-how are driving global integration
Growth in global flows is now being driven by intangibles, services, and talent. They have picked up the baton from goods trade,
Flows of data reached all-time highs and, crucially, enabled remote working and the continued operation of businesses at a time when travel was largely impossible.
- Asia–Pacific, including China, is the leading global manufacturing exporter overall and the largest supplier of electronics, but it imports more than 25 percent of its energy resource needs as well as critical intermediate goods. Energy resources from the Middle East and Russia power China and India. China also imports more than 25 percent of its mineral needs; the largest minerals corridors in the world run from Australia, Brazil, Chile, and South Africa to provide the inputs for China’s manufacturing hub. Europe and North America provide much of the advanced machinery and the intangible know-how that supports production of advanced electronics such as semiconductors.
In Latin America, Brazil and Argentina are two of the world’s largest grain exporters, but they rely on flows of fertilizers from the rest of the world. Notably, they have been sourcing more than 50 percent of their potash imports from Russia and Belarus.
China exports more than 60 percent of the most concentrated products in the electronics and textiles sectors. Asia–Pacific contributes disproportionately to exports of concentrated minerals.
Lithium, rare earths, and graphite are particularly concentrated, largely extracted from three or fewer countries and mostly refined in a single country: China.
Latin America and North America account for the majority of the most concentrated agricultural products, notably soybeans. The majority of concentrated medical and pharmaceutical products come from Europe.
To negotiate an era that may be more complex and challenging requires a deeper understanding of the full picture of global flows, their networks and evolution, and potential scenarios for the future.
Looking at the entire range of global flows, it is clear that the world is not defaulting to deglobalization, but that global connections are reconfiguring.
Firms that reimagine rather than retreat from interconnection can reshape value chains in ways that contribute to both growth and resilience.
