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goods-producing sectors across different economies in order to have an accurate understanding of how they really compare,” says Sapir.
Russia is situated between China, where services represent only 49% of GDP, and countries like the United States, France and Italy, where services represent at least 75% of GDP. Germany is in an intermediate position, with 69% of its GDP coming from services. Russia’s position can be explained by the size of its industrial and agricultural sectors – a makeup that affects its real weight.
Looking at the share of productive industry in Russia’s economy compared to Germany and France – both nominally bigger than Russia – and Germany is only 90% of Russia’s size in terms of productive industry, while France is a mere 44% of Russia’s industrial power. China is even further ahead, with Germany equivalent to only 11% of China’s productive industry, and even the US is only 34% of China’s productive power.
“Russia and China’s GDP are significantly larger when we consider only directly productive activities. China’s economy becomes nine times stronger than Germany’s and three times as strong as that of the United States. The Russian economy also ends up outranking the German economy and clocks in at more than twice as strong as the French economy. This completely changes our vision of these economies – far from the claims that Russia ranks at the same level as Spain or that China still lags far behind the United States,” Sapir argues.
Innovation index However, the analysis can’t end with just having a lot of big factories. The quality of what they make also plays an important role. And on this score Russia falls down, as it remains heavily dependent on Western technology, as bne IntelliNews reported in a deep dive into Russia’s precision tools sector, the Kremlin’s soft sanctions underbelly.
Innovation can be measured imperfectly by counting the number of patents filed each year, or by the cutting-edge technology content of the goods produced.
Russia used to have world-class scientific research, especially strong in the hard sciences, but it collapsed after the fall of the Soviet Union and as bne IntelliNews reported, it has missed out on two revolutions in technology since then. It has little chance of catching up in the next few generations. China, however, as the table shows, has invested heavily in technology and has already surpassed the West in several important areas, renewable technology and manufacturing being key among them.
“With this indicator, China still comes out on top by a wide margin, but Russia falls back to sixth position. More broadly, the combined number of patents from China and Russia is almost double that of the United States, Japan, South Korea, Germany, France and the UK combined, giving us an idea of the balance of power on this front,” says Sapir.
Key commodities The final factor to consider is to assess a country’s role in the export of key inputs. Russia has a cornucopia of raw materials and dominates the export of many critical products needed by industry. In this
RUSSIA Country Report September 2023 www.intellinews.com