The Impact of Globalisation on China
Globalisation is the process of economic integration leading to more open world markets and the customisation of products, services and technology. China is located in Eastern Asia and it is the largest country in terms of population size. It is currently the world’s second largest economy after the US with a value of $7.043 trillion in PPP US$ terms and has made rapid progress in economic and human development by reforming its economy. China has a socialist economy ruled by a Communist government which was installed after Mao Tse Tung defeated the Nationalists in the Civil War of 1949. Under Mao’s rule, China tried to modernise its agriculture and industry but failed to raise national output significantly and resulted in widespread famine and poverty.
China is both a newly industrialised economy and an economy in transition. It has had rapid rises in private consumption per capita and sharp improvements in the quality of life. Life expectancy has risen from 63.2 years in 1975 to 72.88 years in 2007 and literacy rates have rise from 78.3% in 75 to 90.9% in 2004. It also had a GDP growth rate of 11.4% in 2007 and it is currently changing from a centrally planned economy to a market-oriented economy.
Economic growth occurs when an economy can produce more goods and services and is the percentage rate at which the economy is growing. It is measured by removing the effect of inflation from money value of GDP to get the real value of GDP or a measure of the quantity of production. It is seen as the first step towards economic development. China has sustained average annual rates of growth in real GDP of around 8.5% between 2001 and 2007. It is now the seventh largest economy in the world according to the measurement by the nominal value of GDP in US$. China’s rapid rate of EG in the 80s, 90s, and 00s was based on an export oriented strategy financed by direct foreign investment. Rising real incomes and significant improvements in indicators of development have resulted from the economy doubling in size in the 80s and 90s. Economic development is the average standard of living achieved to date by a nation. China’s level of economic development has risen significantly and their people enjoy rising per capita incomes and quality of life improvements. In the last 25 years, China has substantially reduced poverty by 400 million people.
The impact of globalisation has been evident in the Chinese economy as it has helped China to maintain an economic growth rate of over 10% in the recent decade. China now has a current account surplus of $363.3 billion and a low external debt to GDP ratio. Domestic savings levels are high being 40% of GDP and China’s new taxation system provides incentives for more savings and increases in productivity. Foreign direct investment in China remains a key driver of Chinese EG. The Chinese government has extensive capital controls place to encourage foreign direct investment rather than portfolio investment. China attracts record levels of foreign direct investment as companies continue to shift productions to the world’s most populus country to take advantage of the cheap labour market.
China has one of the highest saving rates in the world largely due to rising incomes but also the lack of robust social safety net to protect citizens from changing economic circumstances. The high level of saving in China has enabled gross capital formation to be funded from domestic and foreign sources. Since Shanghai and Shenzhen stock markets were established in the early 2000s, share trading volumes have expanded rapidly as more of China’s largest public companies were listed on the two exchanges. In May 2007 the governor of the People’s Bank of China Zhou Xiaochuan put up interest rates and increased reserve requirements on banks to curb lending growth particularly for the purchase of shares.
It now accounts for 10% of the world’s consumption of resources because of its large population, high rate of EG and reliance on resource and energy imports. It mainly trades with countries in the Asian region such as Japan, HK, Korea and ASEAN. China’s exports and imports are both dominated by manufactured goods with intermediate manufactured goods, comprising a higher share of imports than exports. This reflects the role that China plays in the processing of higher value added goods, including information and communications technology equipment.
Large geographic disparities in income remain across provinces. Per capita incomes are higher in urban areas in the east and south of China compared to rural areas in the north and west. They are also higher in the southern coastal provinces of China compared to the north, and in the eastern coastal provinces, compared to the western provinces.
China has sustained average rates of EG of between 6% and 8% for the past two decades. This rapid rate of EG has led to rapid resource use and environmental degradation. China is therefore experiencing severe environmental problems associated with resource depletion and the environment in 2007. A report has found that up to 7% of China’s annual GDP is lost because of pollution. The Chinese government has now begun to recognise and address the environment problems that have emerged because of rapid EG and industrialisation.
There are many different strategies that have been used in China to promote high economic growth and development. Mao’s successor, Deng Xiao Ping implemented a range of reforms designed to improve the economic performance of China.
Closing the economy was unsuccessful since the prices of imports and exports and wages were fixed. China couldn’t trade as the heavy industries were inefficient; there was low worker motivation, a shortage of basic food and poor quality of goods and services. However the agricultural reform was successful as the industries owned by the townships and villages promoted high economic and surplus in the rural labour force. The “Open Door” policy towards foreign trade and investment was beneficial as it involved setting up the Special Economic Zones in southern and some eastern coastal provinces of China. These zones attracted foreign investment and enterprises through a range of incentives such as low tax rates and less stringent government regulations. The reform of its banking system helped to restructure the banks, strengthen financial regulation and open up to foreign competition. The ‘One Child Policy’ was introduced to monitor China’s population growth. This policy helps to reduce government spending, for health care services, retirement benefits and decreases unemployment
Other reforms were implemented after Deng Xiao Ping’s term as Chinese president.
The decentralisation of State Owned Enterprises (SOEs) transformed China from a planned to a market-oriented economy. It decreased government’s role in allocating resources and introduced the new pricing system which allowed increase in competitiveness and dynamical and technical efficiency. The West central development strategy aimed to facilitate the integration of domestic market in China. The success of this was started by building infrastructure projects and urban facilities in the western region. This has erased existing political, economic and social divisions between east and west regions.
The inner regional development strategy was implemented in order to encourage firms on the east to invest and cooperate with firms in the west. This has resulted in more investment from foreign companies; an increase in labour mobilisation and more capital inflow of funds to be used for infrastructure. The new Taxation Reform helped to improve the efficiency of tax collection leading to increase in employment, living standards, increase in GDP, government budget revenue and government spending. The introduction of the tariff system encouraged domestic efficiency, increased competition in the overseas sector and promoted high efficiency, productivity which increased imports and exports.
China became a member of the WTO in 2001 at the Doha Conference. This has brought major beneficial changes in its economy such as having access to the world market, attracting foreign investment, adopting new ways of management and accessing new technologies. On July 21st 2005, China abandoned its fixed exchange rate against the US$ to adapt a managed float against its trade index. This means that China will be more flexible in setting its exchange rate in the medium term and will give the People’s Bank of China more control over China’s domestic monetary conditions and inflationary pressures.
Globalisation is the process of economic integration leading to more open world markets and the customisation of products, services and technology. China is located in Eastern Asia and it is the largest country in terms of population size. It is currently the world’s second largest economy after the US with a value of $7.043 trillion in PPP US$ terms and has made rapid progress in economic and human development by reforming its economy. China has a socialist economy ruled by a Communist government which was installed after Mao Tse Tung defeated the Nationalists in the Civil War of 1949. Under Mao’s rule, China tried to modernise its agriculture and industry but failed to raise national output significantly and resulted in widespread famine and poverty.
China is both a newly industrialised economy and an economy in transition. It has had rapid rises in private consumption per capita and sharp improvements in the quality of life. Life expectancy has risen from 63.2 years in 1975 to 72.88 years in 2007 and literacy rates have rise from 78.3% in 75 to 90.9% in 2004. It also had a GDP growth rate of 11.4% in 2007 and it is currently changing from a centrally planned economy to a market-oriented economy.
Economic growth occurs when an economy can produce more goods and services and is the percentage rate at which the economy is growing. It is measured by removing the effect of inflation from money value of GDP to get the real value of GDP or a measure of the quantity of production. It is seen as the first step towards economic development. China has sustained average annual rates of growth in real GDP of around 8.5% between 2001 and 2007. It is now the seventh largest economy in the world according to the measurement by the nominal value of GDP in US$. China’s rapid rate of EG in the 80s, 90s, and 00s was based on an export oriented strategy financed by direct foreign investment. Rising real incomes and significant improvements in indicators of development have resulted from the economy doubling in size in the 80s and 90s. Economic development is the average standard of living achieved to date by a nation. China’s level of economic development has risen significantly and their people enjoy rising per capita incomes and quality of life improvements. In the last 25 years, China has substantially reduced poverty by 400 million people.
The impact of globalisation has been evident in the Chinese economy as it has helped China to maintain an economic growth rate of over 10% in the recent decade. China now has a current account surplus of $363.3 billion and a low external debt to GDP ratio. Domestic savings levels are high being 40% of GDP and China’s new taxation system provides incentives for more savings and increases in productivity. Foreign direct investment in China remains a key driver of Chinese EG. The Chinese government has extensive capital controls place to encourage foreign direct investment rather than portfolio investment. China attracts record levels of foreign direct investment as companies continue to shift productions to the world’s most populus country to take advantage of the cheap labour market.
China has one of the highest saving rates in the world largely due to rising incomes but also the lack of robust social safety net to protect citizens from changing economic circumstances. The high level of saving in China has enabled gross capital formation to be funded from domestic and foreign sources. Since Shanghai and Shenzhen stock markets were established in the early 2000s, share trading volumes have expanded rapidly as more of China’s largest public companies were listed on the two exchanges. In May 2007 the governor of the People’s Bank of China Zhou Xiaochuan put up interest rates and increased reserve requirements on banks to curb lending growth particularly for the purchase of shares.
It now accounts for 10% of the world’s consumption of resources because of its large population, high rate of EG and reliance on resource and energy imports. It mainly trades with countries in the Asian region such as Japan, HK, Korea and ASEAN. China’s exports and imports are both dominated by manufactured goods with intermediate manufactured goods, comprising a higher share of imports than exports. This reflects the role that China plays in the processing of higher value added goods, including information and communications technology equipment.
Large geographic disparities in income remain across provinces. Per capita incomes are higher in urban areas in the east and south of China compared to rural areas in the north and west. They are also higher in the southern coastal provinces of China compared to the north, and in the eastern coastal provinces, compared to the western provinces.
China has sustained average rates of EG of between 6% and 8% for the past two decades. This rapid rate of EG has led to rapid resource use and environmental degradation. China is therefore experiencing severe environmental problems associated with resource depletion and the environment in 2007. A report has found that up to 7% of China’s annual GDP is lost because of pollution. The Chinese government has now begun to recognise and address the environment problems that have emerged because of rapid EG and industrialisation.
There are many different strategies that have been used in China to promote high economic growth and development. Mao’s successor, Deng Xiao Ping implemented a range of reforms designed to improve the economic performance of China.
Closing the economy was unsuccessful since the prices of imports and exports and wages were fixed. China couldn’t trade as the heavy industries were inefficient; there was low worker motivation, a shortage of basic food and poor quality of goods and services. However the agricultural reform was successful as the industries owned by the townships and villages promoted high economic and surplus in the rural labour force. The “Open Door” policy towards foreign trade and investment was beneficial as it involved setting up the Special Economic Zones in southern and some eastern coastal provinces of China. These zones attracted foreign investment and enterprises through a range of incentives such as low tax rates and less stringent government regulations. The reform of its banking system helped to restructure the banks, strengthen financial regulation and open up to foreign competition. The ‘One Child Policy’ was introduced to monitor China’s population growth. This policy helps to reduce government spending, for health care services, retirement benefits and decreases unemployment
Other reforms were implemented after Deng Xiao Ping’s term as Chinese president.
The decentralisation of State Owned Enterprises (SOEs) transformed China from a planned to a market-oriented economy. It decreased government’s role in allocating resources and introduced the new pricing system which allowed increase in competitiveness and dynamical and technical efficiency. The West central development strategy aimed to facilitate the integration of domestic market in China. The success of this was started by building infrastructure projects and urban facilities in the western region. This has erased existing political, economic and social divisions between east and west regions.
The inner regional development strategy was implemented in order to encourage firms on the east to invest and cooperate with firms in the west. This has resulted in more investment from foreign companies; an increase in labour mobilisation and more capital inflow of funds to be used for infrastructure. The new Taxation Reform helped to improve the efficiency of tax collection leading to increase in employment, living standards, increase in GDP, government budget revenue and government spending. The introduction of the tariff system encouraged domestic efficiency, increased competition in the overseas sector and promoted high efficiency, productivity which increased imports and exports.
China became a member of the WTO in 2001 at the Doha Conference. This has brought major beneficial changes in its economy such as having access to the world market, attracting foreign investment, adopting new ways of management and accessing new technologies. On July 21st 2005, China abandoned its fixed exchange rate against the US$ to adapt a managed float against its trade index. This means that China will be more flexible in setting its exchange rate in the medium term and will give the People’s Bank of China more control over China’s domestic monetary conditions and inflationary pressures.
The impact of globalisation on China has allowed China to improve its economic growth and development and has increased its connection with the rest of the world. The current president Hu Jintao has followed the policies of his predecessor by continuing to open the economy to market forces in embracing the potential benefits of globalisation. His priorities are to continue economic development and social stability in China.
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