Discuss the influence of globalisation on the Chinese economy and evaluate the strategies use to promote growth and development. Globalisation is the breakdown of trade barriers between nations to allow for the free flow of goods and services, ideas, communication and information. In the 1980s, China had implemented a series of economic reforms which allowed the country to better integrate with other nations in the region. This was endorsed by the government for the Chinese nation to develop itself and become an emerging country to meet advanced international standards.
It has since joined world and regional agreements and organisations, is exporting products and becoming more technologically advanced. Globalisation has resulted in increased growth, greater development which has led to income inequality, increased investment and financial flows, greater emphasis on environmental management and improved government policy. To maintain or manage the impacts of globalisation the Chinese government has implemented strategies. China’s participation in global economic events and trade has been both beneficial and damaging for the nation.
China’s rapid growth in the past decades is caused by the increase of the acceptance of Globalisation. China has undergone many transformations. It has implemented "open door" economic reform policy in 1978, which saw the move from a centrally planned economy to a market based economy with a trade oriented focus. With conjunction to this strategy, China joined the Asia Pacific economic corporation (APEC) in 1991 to develop and maintain economic relations within its region. This impacted China as there is now greater exportation of cheap goods and foreign economic integration.
This is beneficial to China as it has allowed for economic expansion and greater financial flows, which in turn has created greater economic stability for the nation. Due to these economic reforms, as can be seen on the graph, China’s GDP growth in 2011 is approximately 9. 4% per year compared to the world GDP of approximately 3% per year which has positively lifted 600 million people out of absolute poverty. China also utilised their labour resources efficiently by redistributing employment from the previous self-sufficient agricultural sector to more industrialised areas which increased manufacturing.
China’s large population of over 1. 3 billion and high labour productivity has allowed the nation to become an economic power. This transition from an agricultural to a more industrialised economy had allowed individuals to secure employment and for the nation to develop a more skilled labour force. China’s acceptance of Globalisation has allowed it to develop various strategies to manage its rapid growth. The strategies implemented by the government have proven to be beneficial for the overall economic potential and reputation of the country and its citizens.
The rapid growth of globalisation on the Chinese economy has caused greater economic development. This includes greater quality of life, consumption and income. However, this boom is not equally enjoyed by the whole Chinese population as it has unfortunately resulted in a greater class divide within the nation. The western areas of China are largely underdeveloped and outperformed by the eastern areas, thus, the level of income between urban and rural areas has been widening due to globalisation. This growing concern of inequality has prompted the Chinese Government to implement improvements to the system.
Such measures include the ‘develop the west campaign’ which includes increasing investment in rural areas, especially in infrastructure, irrigation, education and health and the implementation of the 2007 agricultural tax and subsidies for agricultural production. The government’s investments aim to create a balanced and prosperous society through economic and social development. As a result, China’s HDI measurement rose from 0. 368 in 1980 to 0. 668 in 2011, however, the Gini co-efficient rose by 0. 05 in 2000 to 0. 5 in 2012.
This is much greater than most developed economies such as the USA and Australia which shows that globalisation is only advantageous to some areas of Chinese society as there is increasing inequality. Despite these policies, China, in 2011, was 114TH in the world with a GNI per capita of $4940, as can be seen on the graph. Although there is a gradual rise in income, approximately 170 million citizens continue to live in absolute poverty on only $1. 25 a day. This polarisation of income has the potential of causing social instability which may deteriorate this economic development.
Therefore, China’s measurements towards increasing inequality as an impact of globalisation are evidently ineffective, thus greater improvements and awareness is needed. Globalisation has allowed for the reduction of trade barriers between china and other nations which has created greater investment and greater expansion of Transnational Corporations (TNC). The removal of trade barriers and the development of a market economy have led to an increase in foreign direct investment (FDI) which has caused large TNCs such as Apple and Nike to transfer their production to China and utilise their cheap labour.
This is beneficial to China’s economy as it decreases unemployment and increases the level of exports. As a result of joining the World Trade Organisation (WTO) in 2001, China had agreed to lower tariffs to the rate of 5% for imported goods. This combined with high labour productivity and cheap products have allowed China to become a successful trading economy, and in turn become the second largest economy in the world. These changes resulted in the exportation of 30% of China’s GDP to its trading partners. As shown on the graph, China exported 1. 9 billion dollars worth of goods.
This benefits the Chinese economy as it increases income for citizens, increases competition as well as strengthening and stabilising economic and trade relations within the region. In 2011, China made up 4% of the world total FDI. This was due to greater industrialisation and privatisation and greater stability of China’s economy. State owned enterprises were no longer government monopolies. The government also allowed Town Village Enterprises to expand economically through incentives that assist free trade, both domestically and internationally. Chinese Private Companies, thus, produced greater output in 2002 than state owned firms.
This foreign investment has positively increased the level of advanced technology and managerial skills, which increases the productivity and production capability, and is thus advantageous to the Chinese economy. As mentioned before globalisation has a caused major increase in economic growth. However as China’s economy grows, so does its demand for resources which causes a rise in environmental problems. China currently suffers from air pollution, soil erosion, acid rain and the steady fall of the water table due to the increase in industrialisation.
The Chinese Government’s actions to these issues are minimal. It has created a five year plan to prevent or reduce the issues as well as a plan to use renewable energy in households. This plan attempts to enhance urban environmental services, promote low carbon urban transport and sustainable agriculture practice and strengthen methods to manage climate change. The Government has only created plans but has not yet implemented them. This does not meet the expectations of the international society and thus could be detrimental to China’s future trade relations.
China’s major exports of manufactured goods are created in a factory where there is some form of damage done to the environment. It is estimated, as shown in the graph, in 2008 China emitted over seven million tonnes of carbon emissions. If we compare this with GDP levels, it is easy to identify that globalisation and the increase in manufacturing is the cause of the rise in carbon emission levels. A study conducted by the Organisation for Economic Co-Operation and Development showed that unless pollution in China is controlled, there will be 600000 premature deaths and twenty million cases of respiratory illness each year.
This is harmful, not only to the citizens of China but also to China’s reputation as a country that does not promote and practice ecological sustainability nor is it concerned for the future health of its citizens. Since the Government has not taken any effective measurements to control its environmental problem, the Government strategies do not comply with international standards and are thus, ineffective in protecting the community. China’s acceptance of globalisation has forced the government to make reforms and introduce new policies to maintain its economic position.
Initially, Western leaders including Richard Nixon and Gough Whitlam visited China in the 1970s to strengthen economic, political and trade relations. This resulted in the ‘open door to trade’ policy in 1978. This had shifted its focus from an agricultural economy to a manufacturing and high labour productivity competitor in the global market. China’s signing of the World Trade Organisation in 2001 accompanied by the reduction of tariffs allowed for greater exports. This had significantly increased the quality of life and income of Chinese citizens.
Globalisation has forced the Chinese government to implement measurements on all aspects of the economy to meet international expectations. The government also has the duty to ensure the safety of its citizens, which means improving the quality of life for the disadvantaged and improving the environment. These reforms have allowed the nation to be perceived as efficient and ethical and are effective in managing the impacts of globalisation on the economy, citizens and environment.
As China continues to increase its degree of integration with the rest of the world, it will become a very substantial global economic, social and political force. The strategies implemented by the Chinese government are in most cases beneficial and advantageous to the nation. They allow for greater growth, development, trade and investment. However, there are some inconsistencies within these strategies that cause them to be flawed. Greater emphasis on income inequality, especially in the western regions, and environmental management is needed for these strategies to be ineffective. Globalistation, as a whole, has impacted in China’s culture both negatively and positively.
- Dixon Tim, O’Mahony John Australia in the Global Economy, 2012 edition
- World Trade Organisation www. wto. org
- Organisation for Economic Co-Operation and Development www. oecd. org
- International Monetary Fund www. Imf. org
- Department of Foreign affairs and trade www. dfat. gov. au
- United Nations Conference on Trade and Development www. unctad. org
- World Bank www. worldbank. org
- Rural Poverty Portal www. ruralpovertyportal. org