is still a much smaller economy than china and only comparable to that of korea at twelfth in the world. but with the recent high growth rates, edging on 10 percent for india and steadily above for china the contribution to global growth has become pronounced. in terms of economic size we will – if present growth differences continue – at some point see china overtake us as the largest economy in the world ( slide 6 ). this is however a prospect which probably will not occur in the next twenty years. in this timeframe india is also likely to considerably move up the economic ladder and if the trends continue by 2030 india will possibly be the world's third largest economy. of course all this is kind of speculative and depends very much on the future economic growth. even though the chinese economy is likely to become the world largest and india the third largest living standards are still very different between china, india and the western countries ( slide 7 ). today in india the average gdp per capita is roughly two percent of that of the us and roughly 5 percent of that of the us in china. this will go up markedly and a large extent imf, reaping the benefits of financial globalization, discussion paper, june 2007. of catching up from these countries will occur ( slide 7 / 2 ) if we look to 2015 and especially if we look to 2030 when the living standard relative to the us will have increased by a factor 4 for india and 6 for china ( slide 7 / 3 ). if you contemplate that this is over 2 billion people i think it is remarkable. the trend of increasing importance of these economies will thus most likely continue in the coming years and will turn the world's economic focus to asia. this trend will hopefully be supported by further lifting of trade restrictions where especially agriculture still has a lot of potential for increased international trade. the largest risk to the process of continued globalization is, taken from history, wars. the interwar period and the 2nd ww reduced the international trade and this was probably the only period in the last 150 years in which global trade grew slower than global gdp. 4 demographic trends the demographic development in past, present and future has been a factor contributing to shaping the world economy ( slide 8 ). china and india have in the last twenty years experienced a decreasing ratio of dependent individuals to individuals in the work force. this has in itself helped creating the economic upturn. in the case of china this profile will, however, start to change

investments which help increase efficiency. d. a. irwin, long - run trends in world trade and income, world trade review ( 2002 ), 1 : 1, 89 - 100. imf, world economic outlook october 2007, chapter 4, p. 33. this is often one of the key arguments for the part of financial trade known as foreign direct investment or fdi. another benefit of financial globalization is the increased scope for consumption smoothing for individuals and countries. as the business cycle of emerging markets often is decoupled from that of industrialized countries, the possibility of global investment should also benefit investors in that they are able to spread their investment. however financial integration is also associated with a range of risks. these include a possibility for greater volatility as capital inflow can be withdrawn in the face of a crisis or just a change in sentiments and " flight to quality " as we have seen in recent months ; however, the effects on emerging economies have been small. the evidence suggests that the largest benefits from risk - sharing have accrued to advanced economies. countries with developed domestic financial systems, open trade, good governance and sound macroeconomic policies have not experienced greater volatility due to greater integration. those without these “ thresholds ” have. 3 reasons for globalization the shrinking importance of geographical distance due to technological progress is one important aspect of the increased interaction in the world economy ( slide 4 ). this is largely due to the evolution of transportation measures, reduced cost and increased speed. it has been an ongoing process through the century and is thus less likely to be the reason for the recent up - surge in international trade. communication possibilities through for example the internet has increased markedly over the past decades and has contributed to the increased globalization. however, the most significant change over the past decades has been the inclusion into the world economy of countries which were formerly very closed economies. the integration of china, india and the former communist bloc countries into the world economy and the increasing support for international rules and institutions such as the wto is thus one important explanation for the recent surge in international trade. 2. macro trends growth contribution first, the relative importance of the economies in the global economy is changing fast with the ( re ) emergence of the large and populous countries of russia, china and india into the global economy. in 2007 the imf estimates that china will be the largest contributor to global growth and be the fourth largest economy ; roughly the same size as the german ( slide 5 ). india