Euler Hermes 2019 Enabling Digitalization Index: the Chinese breakthrough

  • The Enabling Digitalization Index (EDI) measures how countries help digital companies and support traditional ones harness the digital dividend.
  • Digital agility is a key element of non-payment risk by companies: countries that either transform too fast or too slow are prone to insolvencies.
  • The US, Germany and Denmark successfully made the top 3 of the 2019 EDI ranking. Denmark in particular moved up 9 ranks.
  • China made it to the top 10 for the first time after rising a remarkable 8 ranks. This breakthrough, however, adds to the worry of a digital cold war, on top of the US-China trade feud.
  • Overall, three Asia countries cracked the top 10 (Singapore, Japan and China) while Hong Kong finished at 11th and Korea at 16th to round out the top 20.

 

Euler Hermes presents the third edition of its Enabling Digitalization Index (EDI), which analyzes a country’s ability to provide an environment where companies can digitally transform successfully. The score is calculated based on five components: connectivity, infrastructure, regulation, knowledge and size.

 

Leaders of the digital world: US vs China

Once again, the US tops the list with a score of 87 out of 100. The country’s knowledge ecosystem, its competitive market size and favorable regulation help US companies digitalize quickly despite the fact that its infrastructure score saw a slight decline from last year.

Denmark is a newcomer to the top 10, and a particularly interesting case, climbing up nine ranks to the 3rd position this year. The country seems to have benefited from a unique connectivity improvement and enhanced infrastructure. Overall, Western Europe stands out from other continents with 19 countries ranked in the top 30 and 4 out of the top 5.

 

Chinese breakthrough

China slingshots into the top 10 at 9th place, up from 17th place in 2018. How? “Thanks to regulation, such as shortening lengthy procedures to open a business, improving protection of investors as well as streamlining other business related procedures. However, China’s breakthrough is a wake-up call: it partly explained how the US-China trade feud has turned into a digital cold war and the geo-politicization of the 5G technology race, explains Georges Dib, Economist at Euler Hermes.

 

Adoption vs insolvency

This year, by highlighting the gap between countries’ potential for digitalization and the actual realization, our report takes aim at what it could mean to insolvency. Despite finishing high on EDI, both Germany and the UK have shown that their adoption of digitalization are relatively lower than its peers.

 

Ludovic Subran, Chief Economist at Euler Hermes, remarks, “Germany, the UK, France, Spain, Austria and Switzerland show a high potential for digitalization but adoption is still too low. They could see a rise of digital zombies among their worst-performing firms, thereby amplifying insolvency risk.”