Summary
The client asked for a tool to measure China’s increasing economic and political ties with other Asian countries. Fathom’s solution was so effective that the client asked for the project to be expanded to cover the whole world, and to include the influence of the EU and the US as well as China. Fathom’s proprietary Centrality Tracker now maps connections and interdependence between the three global hubs and more than 150 countries, across more than 50 variables covering commodities, trade, finance and development. It provides a unique framework to answer questions such as: which countries will suffer if economic growth slows in the economic powerhouses, and why? Which countries are non-aligned and in play?
Key facts
Client
Government
Brief
A tool to measure economic interdependence in a multi-polar world
Timescale
Ongoing since 2018
Focus area
China economics
Our approach
Fathom applies the same rigorous, proven process to every piece of work; this process is the DNA that makes up our world-leading research.
The Centrality Tracker balances depth with breadth. It includes enough detail to reflect the type and strength of interdependence over time, so that the Tracker can assess to what extent and why changes in economic growth and policy at the hubs will impact elsewhere. It uses bilateral data, comparable across the US, EU and China. The client specifically asked us not to limit the number of countries for the sake of adding extra variables, so we set the inclusion threshold for a variable at around 150 countries, with a good global spread.
The tool now includes more than 50 variables, covering commodities, trade, finance and development. It draws data from many sources. For the EU we have formed an EU aggregate of data from 27 countries, excluding intra-EU flows.
To help with interpretation the tool identifies clusters, or personality types, of countries with similar traits: for example, ‘EU investors’ (comprising the UK, Switzerland, South Africa, Norway, Iceland and the Bahamas) carry out significant M&A investment and some greenfield investment in the EU, but do not receive much in return. Eleven distinct clusters emerged for China, ten for the US and ten for the EU.
Each connection is benchmarked by how sensitive it is to changes in GDP at the hubs, producing a broad spectrum by individual country and by cluster. For China, we also modelled sensitivity to changes in its growth strategy, based on a purpose-made indicator known as the China Growth Strategy (CGS).
Thanks to its intuitive dashboard, with data visualisations and filters, the Centrality Tracker can swiftly answer such questions as:
- “How sensitive is Africa to changes in China’s economic growth rate and why?”
- “Is Latin America more closely aligned to the US, EU or China, and what has changed?”
Delivery
The Centrality Tracker began in 2018, and continues to grow and become more informative. Its insights inform our quarterly Global Outlook and our consultancy work. Access to the dashboard remains restricted to subscribers, who receive a briefing after every update.
For more information about subscribing to the Centrality Tracker please contact us via the form below.
Impact
Subscribers gain exclusive insights from an unique, empirically grounded model to help them assess the spillovers from economic developments in the US, EU and China. Fathom’s Centrality Tracker has shown it can produce more realistic results than traditional global macro models, which typically understate the true impact of spillovers.
Key calls
The Centrality Tracker provided a highly accurate estimate of the likely impact of COVID-19 in 2020 Q2. Its assessment of percentage point changes in hub GDP growth, shown by the blue dot in the final bar in the chart below, is incredibly close to the actual outturn (shown by the central green bar), outperforming GESAM ‒ Fathom’s in-house macro model, shown in the first bar ‒ on this occasion.
Get in touch
At Fathom we offer our clients unique insight into China, beyond the official statistics. For more information about our services or to discuss your needs and how we can help, please submit the form below: