The world economy has shifted dramatically over the past 30 years. We have been moving away from a world in which national economies were relatively self- contained entities, isolated from each other by barriers to cross- border trade and investments; by distance, time zones, and language; and by national differences in government regulation, culture, and business systems. As late as the 1960s, four stylized facts described the demographics of the global economy. The first was U.S. dominance in the world economy and world trade. The second was U.S. dominance in the world foreign direct investment picture. Related to this, the third fact was the dominance large, multinational U.S. firms in the international business scene. The fourth was that roughly half of the globe- the centrally planned economies of the Communist world- were off- limits to Western international businesses.
All of these demographic facts have changed. Although the U.S. remains the world’s dominant economic power, its share of world output and world exports have declined significantly since the 1960s. This trend doesn’t reflect trouble in the U.S. economy, but rather reflects the growing industrialization of developing countries such as- China, India, Indonesia, and South Korea. This trend is also reflected in the world foreign direct investment picture. The foreign direct investment generated by rich industrial countries. Shifts in the world economy can also be seen through the shifting power of multinational enterprises. Since the 1960s, there have been two notable trends in the demographics of the multinational enterprises. The first has been the rise of non-U.S. multinationals, particularly Japanese multinationals.
The second has been the emergence of a growing number of small and medium- sized multinationals, called mini- multinationals. The fall of Communism in Eastern Europe and the republics of the former Soviet Union have brought about the final shift in the world economy. Many of the former Communist nations of Europe and Asia seem to share a commitment to democratic politics and free market economies. If these trends go on, the opportunities for international business may be enormous. The implications of these shifts are similar for North America and Britain. The United States and Britain once had the luxury of being the dominant players in the world arena, with little substantive competition from the developing nations of the world. That has changed. Today, U.S. and British manufacturers must compete with competitors from across the world to win orders.
The changing demographics of the world economy favor a city like Hong Kong. Hong Kong (which is under China rule) is well located with easy access to markets in Japan, South Korea, Indonesia and other Asian markets. Hong Kong has a vibrant labor force that can compete on par with the industrialized nations of the world. The decline in the influence of the U.S. and Britain on the global economy provides opportunities for companies in Hong Kong to aggressively pursue export markets. From the above discussion we can say that we are moving toward a world in which barriers to cross- border trade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent, integrated global economic system.