Examine the impact of globalisation on an economy other than Australia

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An important trend occurring in the world economy is the process of globalisation. Globalisation is the progressive integration between national economies and the breaking down of barriers between trade and financial flows around the world, which will eventually lead to the emergence of a single world market. Globalisation has affected many different nations in different ways, depending on their degree of development and extent to which they are open to the flows of the world economy.

China is said to be the next economic super power. Many guru economists such as Lawrence Summers predict that in the opening decades of the 1st century, china will match the US and Japanese economies. China currently ranks seventh strongest economy on a global scale. China's economic success has not been confined to raw economic growth, especially with a huge trade surplus of over 40 billion according to world guide from 18. China has an annual per capita Gross Domestic Product (GDP) of $750. China has shown amazing growth averaging 10 per cent per year and shows no slowing down because of globalisation. Today China would have to be the most alluring country, ever since November 1 when the country began talks with the US. The international community and US business sector have seen the "Communist" country as offering immense opportunities. With a market of more than a billion potential customers, a figure equivalent to one fifth of the world population who would disagree. China also now has plans in joining the World Trade Organization (WTO). China has taken many steps in globalisation and it has definitely impacted greatly.

Over the past two decades, with many radical economic reforms, China has achieved great success. Firstly by muting all international conflicts and geopolitical ambitions, China followed the examples of other newly industrialising economies (NIEs), giving priority to industries and sectors where limited government investments would produce rapid growth. Farms were given back to the farmers and they were now free to plan production, distribution, which lead to huge increases in productivity, surplus income and output. This new system led to surplus income being invested in the privately run town or village enterprises for light manufacturing. Young workers were now offered a contract system of employment instead of the previous lifetime assignment to a production unit. Permission to start small businesses such as restaurants and shops were now given to families and individuals. The government introduced a phased program of removing price subsidies on consumer good, which allowed the market to determine the price of goods to spur economic growth and encourage consumption. As these reforms began to stabilise in the Chinese economy, more goods appeared in shops and wages increased for several years. Amazingly the enduring problem of unemployment and underemployment reduced because of more and more people becoming self-employed.

Also China was very encouraging to foreign investment due to globalisation, it announced a dramatic new openness to foreign trade, investment and borrowing. To achieve China's goals of reintegration with Taiwan and Hong Kong and an acceleration of outward economic development, four Special Economic Zones were established. Three of these SEZs were situated in Guangdong Province, Shenzhen, north of Hong Kong; Zhuhai, north of Portuguese enclave of Macau; and Shantou, opposite southern Taiwan. The fourth was Xiamen, which is in the southern part of Fujian Province along the Taiwan Strait. These Special Economic Zones offered a range of enticing incentives to attract foreign investors, such as exemption from taxes for a maximum of five years and permanently lower taxes, cheap land and labour and less stringent regulations. With these in place, trade grew from 10% of GNP in 178 to 6% of GNP by 16.

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In major department stores today, shoes, shirts, sweaters and toys that once carried labels saying 'Made in Korea' or 'Made in Taiwan' now predominantly say 'Made in China'. This shows China's increase integration with the world economy and China has now become a major trading nation due to globalisation, ranking eighth in the world as an exporter of manufactured goods. China runs a large current account trade surplus, which rakes in over 40 billion US dollars each year. This figure is ever increasing and doesn't look to be slowing down. China also has a low net external debt to GDP ratio of 16.6% and receives a great deal of foreign investment funds, which are used to finance export industries. This allows China to maintain large foreign currency reserves and receive technology transfers from industrial countries. Globalisation has also led China to increase and improve banking facilities, which have led to network banking; establishment of stock exchanges and a more sophisticated capital market. The emergence of a financial market has also occurred due to globalisation, as China is looking much closer to a market economy. Financial markets are needed to control the money supply, with a reasonably tight fiscal policy and credit policy, this lead China to create a bond market, offering bonds with attractive interest rates to soak up excess money that threatened to fuel inflation. China's trade partners have also risen dramatically due to globalisation, as in 150, China had only 60 trade partners, now it China has 7.

Globalisation has clearly given China's people a much-improved lifestyle. In 178 50 million Chinese lived in absolute poverty and this amazing dropped to around 0 million now because of globalisation. Also GNP has increased from 80 Renminbi during the 150's to 4000 Renminbi and nearly every household now owns a television. Living space has grown dramatically in both urban and rural areas, with urban soaring from .6 square metres before globalisation to 8.8 square metres due to globalisation with rural areas living space per capita rose from 8.1 square metres to .46. China's people's health has also improved dramatically with life expectancy increasing from years during the 150's to 71 today, which is higher even than the world average of 64 years. Furthermore education and health care is improving constantly as in 14 80% of adults were illiterate and there were only 000 medical institutions for a population of over 500 million where as now only 6% of adults are illiterate and 10 000 medical institutions. Globalisation has clearly improved enormously the welfare of China's people.

Though globalisation has helped China grow at an intense rate of around 10% GNP annually, improved its peoples welfare, turned China into a major trading nation. There has offcourse also been many negative impacts, as any reforming communist state always face a variety of serious problems. Such as worker's welfare beginning to deteriorate and the new system of employment generating insecurity, whilst managers were also given more power, to hire and fire workers and set production targets. Also trade unions were not given any corresponding freedom to act and that has also clearly contributed to this problem.

One major incident, which occurred due to globalisation, was in 18. The year began with a rebellion of intellectuals under the leadership of an astrophysicist by the name of Fang Lizhi who was in tune with America's views for improvement in human rights. With inflation rising to approximately 0 percent, corruption increasing, and mainly because China ran two systems also known as a halfreformed country. These two systems were inevitably always in conflict with the stagnating state sector with its central planning, contrasted with the dynamic pluralistic market sector consisting of township and village enterprises, join ventures with foreign firms, and newly emerging private enterprises. Hundreds of thousands of citizens and workers in Beijing began to demonstrate support for the reform movement. Eventually on June 4 18, the government called upon hundreds of tanks and heavily armed soldiers who were to spread death and destruction in the main streets of Beijing. This lead to an enormous amount of deaths, but the actual number will most likely never be known.

Another major problem is State enterprise deficits. China's state owned enterprises have been extremely inefficient and to continue operation, they need to be kept afloat by direct government subsidies and loans from the central bank. This then increases budgetary pressures and inflation for the government. Also, these state enterprises inefficiency is also gradually contributing as bad loans on the books of China's banks and China's banks already have enough of these 'loans'. Over half of China's state owned enterprises record losses and offsets the profits made by the rest.

China's economy faces massive infrastructure problems, such as insufficient telephones, inadequate transport, energy shortages, poorly developed schools and hospitals and much more. These problems are a universal consequence being faced due to Asian-speed economic takeoffs by Asian countries. Unlike inflation and state enterprise problems, infrastructure inconveniences are crises of success. China is still developing its legal infrastructure such as commercial laws and regulations that protect private property rights, investors and creditors. This emphasizes a market economy and shows China's ever integration to a global market. Also environmental problems have occurred due to globalisation with water, air and noise pollution increasing dramatically mainly in urban areas. An example of an environmental problem is how the use of chemical pesticides and fertilizers soared by farmers soared, which began to approach dangerous levels, hence laws are needed to protect the environment. Globalisation has also created enormous opportunities for corruption, misunderstanding, confusion and delay. Laws need to be clear and enforced to help prevent these problems.

The single most obvious risk due to reforming a socialist state is inflation due to the removal of price controls. China offcourse has not been immune to inflation, especially with China's spectacular growth rates, high inflation is occurring. In the late 180s, workers found that their buying power was falling, as prices rose by 18.5 per cent in 188. This was the prime cause of the Tiananmen Square crisis. Because of this China has had to borrow Western market methods of inflation control of controlling the money supply. Also Fiscal policy has been challenged through widespread tax avoidance, which has contributed greatly to the budget deficits. Tax reforms and more efficient spending programs are needed to achieve better fiscal outcomes.

The constant increasing of social and income inequality in China between the new rich cities, urban population and the majority of workers and the rural population is another large problem China has been faced with due to globalisation. For example in 14, incomes varied from over 8,000 Chinese Renminbi in the coastal areas of Guandong Province to between 500 to Renminbi in a northern province, which was less than 00 kilometres away. Employment opportunities and income growth is increasing in Special Economic Zones, where as rural areas are facing increasing unemployment and low incomes. Political instability and social disruptiveness has occurred because of this, with pushes of economic reforms to be implemented by the government from its people. China is also incredibly dependent on the Special Economic Zones for economic growth as SEZ's are dominated by foreign investment and technology. In contrast the far less developed areas are extra reliant on agricultural production for the generation of income and employment opportunities. As you can see there is a classic dualistic economic and social system, which is typical of many developing countries. China is also now prone to the international business cycle because of globalisation. As in 17- China experienced a slowdown in its export demand because of the Asian financial crisis.

China is a nation that has been able to take advantage of increased globalisation to promote its radical growth and development the past two decades and a bit. However, it is also a nation that has experienced the disadvantages of economic integration. Even though China has experienced the disadvantages of economic integration, the advantages clearly outweigh the negative impacts. Because of economic integration, China has been labelled the next super economic power, and has put itself on the map as a major trading nation. Globalisation has been good to China's people especially in improving their lifestyle and annual income. China's economic take off has clearly improved lots of the world's poor more than any other development in the world today.

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