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HSC Economics: Globalisation- China Essay Essay

Analyses the impact of Globalization on an economy other than Australia. Chosen Economy- China Globalization is the growing interdependence of the world’s people and world trade. It involves shrinking space and time and breaking down borders in order to allow people access to new technology, markets, tools and organizations such as the WTFO.

Globalization impacts positively on China’s economy by increasing trade and GAP, encouraging foreign investment from Transnational Corporations (Tan’s) and national economies, providing extra opportunities in the labor market and exposure o global markets, and in the case of China, lifting 400 million people out of poverty between 1978 and the present day. Adult illiteracy rates have also fallen in China from 37% to 5% between this time, and infant mortality rates from 41 per 1000 births to 32. However, these positives come at some cost.

Negatives such as environmental damage influence the sustainability of growth in China, which is nearing its peak. Other negatives include short-term inequalities in the distribution of income and added competition for domestic producers from foreign competitors. These positive ND negative impacts need to be identified and managed, and this is where international treaties and organizations, as well as governments, intervene to ensure that development

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strategies provide maximum benefit for an economy with minimal negative impact.

Thanks to Globalization, between 1990 and 2000, the number of people living on less than one US dollar per day in China fell by 170 million. During this time, the population grew by 125 million. However, 135 million people still live on less than one US dollar per day, mostly due to their geographical position within China making it hard for industry to develop. This shows the limit of the positive impact that Globalization can have on an economy like China without Government intervention to spread growth to these inconvenient areas.

The Chinese Communist Government is the principle means by which Globalization positive impacts can be maximized for the entire economy. The Government has shown its ability to spread growth since the economic reform from a centrally planned system to a free market system in 1978, especially through allowing non-state enterprises the opportunity to grow. For example, in 1996, state enterprises accounted for only 28. 5% of China’s total Gross Industrial Output Value, tit collective owned enterprises accounted for almost 40%, and individual owned 15. %. The Governments “Open Door policy’, added to by its recent inclusion in the WTFO, also encourages foreign investment and trade. This provides new capital, new technology, managerial skill and labor training. Added competition has made domestic businesses more efficient, causing an increase in quality and price. Without such a policy from the Government, the efficient use of China’s natural and labor resources would not be maximized, and therefore Globalization would positively impact on China’s economy to a lesser extent.

The recent trade trends show how successful the Government has been in HOC Economics: Globalization- China Essay By Engagingly at $752. Ban, its imports at $631. Ban, creating a $120. Ban trade surplus. As a percentage of GAP, this translates into $962 per capita increase between 2003 and 2005. The Real GAP rate has risen an average of 9% between 1995 and 2005, the total volume of exports increased by 19% and imports by 16% during the same period. Trade is an important indicator of the positive impact of Globalization, as it contributes to a higher overall GAP, which increases the standard of living of the Chinese people.

However, China’s financial markets are underdeveloped, and the level of regional development unbalanced. It is still dependent on bank loans in corporate finance and consumer credits. Despite this, the levels of Foreign Direct Investment (FED) between 2002-3 were the highest in the world, the primary attraction being China’s cheap labor force. Once again, the Government’s Encouraged Industry Catalogue set out the degree of foreign investment allowed in important industries, once more maximizing the positive impacts of Globalization in China.

The government is stable and rules well, which encourages further foreign investment room Trans-national Corporations (Tan’s) who are attracted by political stability. Tan’s are corporations which operate in more than one country. Some of those operating in China include Microsoft, Citreous, Kodak and Motorola. These corporations bring FED, which accounted for 65% of export growth from 1994 and 2006. The Tan’s increase competition in domestic markets, which puts pressure on domestic industry to become more efficient.

Some see these corporations as taking advantage of cheap labor, but in terms of the economy, money is still being injected into China and Jobs are being created. There is no shortage of people to fill these Job openings in China, with the biggest labor force in the world, and one with the potential to grow further. Globalization forces this labor force to be efficient and to work at low cost, but it must not be forgotten that it also provides a market for China’s cheap labor and manufacturing. The Government’s structural reforms allows for the allocation of labor based on the demands of the global market.

Globalization has meant that the composition of the labor force has changed. The number of agricultural workers is falling, with increasing numbers working in industry and revives. However some consideration must go to those Chinese who live in geographically inconvenient places, especially the western and northeast regions. The poverty reduction rate is beginning to fall, as it is becoming harder and harder to lift these people out of poverty. As China’s economy continues to grow with the help of Globalization, the income gap is widening. Growth in urban areas continues, leaving those in rural areas behind.

And the cost to find these people Jobs is great as the mobility of labor in these areas is so poor. There are moving costs, temporary urban stridency costs and once the move is complete, the children must go to urban schools. And even when all of these costs have been covered, there are still large disparities in the income levels of urban workers, not Just between rural and urban workers. Rural workers still earn only 40% of the wages earned by urban workers. This means more rural-urban migration, meaning loss of farmers and farmland to urban practice.

This not only means that people in rural areas end up being worse The biggest negative impact on the economy of China thanks to Globalization is the damage to the natural environment as a result of the exploitation of natural sources. Water pollution and scarcity, arable land loss and air pollution are amongst the highest in the world. And the economic losses from the environmental damage are estimated at between 8 and 12% of annual GAP figures. China’s dependence on coal has meant that five of the ten most air-polluted cities are in China- Beijing, Shanghai, Asian, Shenanigan and Guanos.

The ASS emissions as a result of industrialization causes acid rain which affects one quarter of China’s territory, including 30% of China’s agricultural land. China produces 36. 7 billion tons of industrial wastewater and domestic sewage each year, 80% of which goes into fivers and lakes. 86% of all water in urban rivers is considered undrinkable as a result. But the Government is trying to reduce this negative impact. In April 2006, Went Ojibwa visited Australia to discuss the reduction of energy consumption by 20% per unit of production through a combination of pricing and taxation of and on resources.

The visit reflects China’s policy of International Convergence. By holding talks with other countries, China hopes to consolidate its place in the world economy. There is some evidence to suggest that this is already occurring. China now has an 18. 3% hare in the Japanese export market, an, 1 1 . 1% share in the US market, and a 7. 5% share in the European market. In the past 20 years, since being exposed to world business cycles, China’s share in world trade has grown from less than 1% to more than 6%, and it it’s the 4th largest trader in the world.

China’s integration into the world economy might, however, reduce the flow of FED to other developing countries, increase the competition for developing countries for scarce international capital and essentially take over the market in unskilled manufacturing, making it impossible for there developing countries to compete. It is in China’s best interest, however, to remain on good terms with potential trading partners and to keep developing countries in the market, so the Government searches for these countries in the hope of setting up strategically important trade agreements.

The biggest trade organization that China belongs to is the World Trade Organization (WTFO). The also have bilateral agreements with Thailand, Pakistan, Cypress, Chile, the EX. and Manner. Australia and New Zealand are currently negotiating free trade agreements with China also. The purpose of these agreements s to break down the barriers to trade, to globalize the economy. The short-term effects of unemployment and increased competition are counteracted by the decrease in global labor costs, which are passed on to China’s people, increasing their standard of living.

The question still remains, however, as to whether increased global efficiency is worth the lower incomes for laborers (because of the decreased cost of labor) and the loss of control of the Government over their economy. To combat the Government’s loss of control, the Chinese Government has focused on economic reform and new policies to continue growth. They hope to use foreign competition to stimulate the domestic economy. They aim to keep attracting foreign adjustments to price and wages stay at a socially acceptable level. To do this they will gradually lower import tariffs.

They will concentrate on education to ensure the betterment of the labor force, build more infrastructure, improve agricultural technology, protect the environment and set up social welfare, health and housing reform, all in the effort to reduce the negative impacts that fast Globalization can bring. And so, the impacts of Globalization are both positive and negative, and it is up o the Government to try and reduce the negative impacts, most notably environmental damage and the increased and quick entrance of foreign competition into the Chinese economy.

As long as the problems to do with sustainability of growth due to environmental degradation and the growing concern about the widening income gap are dealt with, for now the impacts of Globalization will mostly be positive. China’s economy continues to grow at an average of 9% in GAP per annum, trade continues to boom, as does the labor market and the standards of living are increasing with the opening up of China to the world economy.

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