International Management – China
China managers will also need to adapt their skills from the traditional Chinese way of doing business to the global rules in order to become as efficient as the other global or international companies. Finally, China main fear is that the central government reforms become a failure due to the social pressure and less growth in some regions of the country. In the event that wages are increasing as Chinese workers request to access to a higher standard of living, then China will loose any possibility to be the lowest-cost manufacturing centre.
However it would probably remain the largest manufacturing centre in terms of production capacity. 2 What impact does and will China’s entry into the WTO have on the economies of other countries? Give some specific examples. The accession of China and Taiwan to the WTO will have a significant impact on the Greater China economies and many others. Some countries will be winning a lot while other will be loosing, as a WTO member, China’s exports and imports would grow at higher rates than if it were not a member.
The entry of China direct consequence is the entry of Taiwan and Hong Kong into the WTO; their economies will
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The United States and other land – agriculture exporting countries such as Canada, New Zealand or Australia will have substantial gains increase with USA obtaining the bigger part. Car and car parts producing countries such as Japan, the E. U or the USA will see a great expansion of their activity with the Chinese market either by direct export or by the creation of local joint ventures. Semiconductor, telecom and computer maker’s countries such as USA, Japan and some southern Asia countries will be taking advantage of the customs barriers lifting at the entry of the Chinese market.
Cooper, steel producer or energy export contribution towards china will increase as long as China growth will need more and more raw material to sustain its production industry. South Korea, Australia, Venezuela will be part of the wining group. On the other hand China’s exports outperforming other Asian (starting from Taiwan) or Central-Latin American (Mexico or Brazil) suppliers in markets such as textiles or apparel will loose the protection of quotas restrictions.
It will have a dramatically social consequence as many jobs will be lost in those countries / industries. FDI shift from ASEAN countries, such as Malaysia, Singapore or Philippines towards China will have a tendency to decrease the pace of GDP growth of those countries especially as more business will be shifting from their home land towards China. Finally international players will see in China opening the possibility to obtain a new source of cheaper manufactured products more specifically in high-technology or retailing sectors.
3 Explain the statement that “Taiwan is both a victim and a long-term benefactor of China’s rise. ” The simultaneous entry of Taiwan and China into the WTO will initiate a whole new set of business opportunities and growth. Since Taiwan trade relation with its favoured partners will remain there will be little impact in the short term on its exportations. On the contrary, Taiwan will suffer and will see its internal market swamped by Mainland Chinese products.
It the most visible part of the change and most consider that Taiwan will loose much as the most China manufacturing industry will increase and the more Taiwan market will see huge quantity of Chinese product coming into the island. This will lead to a loss of jobs in the affected manufacturing sectors. Many countries consider Taiwan as a gate towards China, and consequently will tend to increase their investment in the island seeking for foundation for their Chinese development.
Since the companies already established in Taiwan will have better opportunities than any ones; Taiwan will in the wake of china, see and increase of its exports and investment towards the mainland, therefore becoming potential growth factors for Taiwan. Players in the financial services or high technology are only some of the many sectors with this winning potential. 4 Explain the statement that “China’s WTO debut is not uniformly good news for the 1. 3 billion Chinese. ” China entry in the WTO will have several effects on the trade of Chinese and its import – export.
Many international companies will increase their production facilities set up in China to gain advantage of the low wages and the die out of customs barriers for Chinese manufactured goods at the entry of WTO countries. This will however have a harmful effect as those international companies will be running after for the lowest labor cost. This race will be against the interest of the labor class especially in the southern provinces of China where wages are lower and where no benefits, pension, sick days or overtime has been set in the minds of the labors.
The opening of the Chinese agricultural market result would be a decrease in the income of the rural population as farmers will not be able to compete against the productivity of the world largest agriculture producers. The huge difference of productivity and the requirement of investment for equipment and machine needed to be put into the Chinese agriculture will not be enough compensated by the low wages of the Chinese farmers. 2 This would result in increasing poverty in those provinces, throwing more people at the door of the factories in search of a better future as worker.
Consequently to the competition coming from migration of rural agricultural workers, the potential rise of production workers wage will be much smaller than those of skilled labor or rental price of capital. 3 China has no social system in place to pick up the victims other that through subsidized employment; But since WTO rules application will destroy this last social welfare tool, the final social result could even destroy to some extent the basic human rights and China’s government will meet the unrest with more repression, not with more democracy4.
5 What if any changes have occurred in China since this case was written at the end of 2001? China’s vast population failed to notice any great impact on their lives when China joined the World Trade Organization on December 11, 2001, but after more than three years change has spread all over the mainland. Car sales in China frequently hit new records with the majority sold to private buyers. The Chinese people have found more imported products in their lives. French perfumes, Italian shoes, tropical fruits or even limousines are available and sold at affordable price.
Services are also provided by non Chinese firms such as funded banks or insurance companies. Beijing people have been enjoying financial services offered by overseas firms. This also can begin to be felt in other sector such as the tourism or airlines. WTO entry required changes in governmental operations that needed to become more efficient. Chinese central government together with the provincial power has amended thousands of laws or regulations in order to be able to achieve this new efficiency.
The English language skills of many Chinese graduates have improved significantly in recent years. A great deal of effort is currently being made to improve English language skills. For example, both Chinese middle schools and universities have been gradually modifying the way English is taught to include a focus on speaking and listening skills as well as the traditional emphasis on reading and grammar. Over $5. 4 billion has been invested in nine universities in China to promote the English language and related skill sets. 5
In 2004, China will overtake Japan to become world’s third largest trading economy (measured as the sum of import and exports). It has also become the largest developing country recipient of FDI. China’s economic diplomacy has accelerates as it pursues and increasing visible role both in global trade liberalization in the Doha round or in regional bilateral agreements. 6 The SRAS or the avian influenza have begun to show that the Chinese position in terms of cost is often going against some of the minimum requirement of sanitarian standard required by the western countries.
This has brought a new challenge to local companies as some of their exports with comparative advantages were frequently blocked by quarantine standards or safeguard measures. While prediction where that some industries or sector would be ruined by the entry of China in the WTO, either in China or overseas this has not been the case and changes towards stability is in progress. 1 The BPO Market in China-The Emerging Giant of BPO, Sophie Li, May 2004
The implication of accession to WTO of China’s economy, Fan Zhai and Shantong Li, May 2000 3 The implication of accession to WTO of China’s economy, Fan Zhai and Shantong Li, May 2000 4 WTO No Help To Chinese Workers, Jeremy Brecher and Brendan Smith Baltimore Sun, March 10, 2000 5 The BPO Market in China-The Emerging Giant of BPO, Sophie Li, May 2004 6 The United States and the World Economy: Foreign Economic Policy for the Next Decade, C. Fred Bergsten and the Institute for International Economics, January 2005