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Globalisation, a result of social development, can be described as the increase in cross-broader trade and influence on the economic and social behaviour of nation states (David Begg, 2003:272). This process has affected the world widely and deeply, principally in economics, industrial, technological, political and cultural aspects.
Over the past decade, as the liberalization of national and openness of global markets, globalisation has benefitted the world significantly, such as income improved, increase of imports and exports, industrial development, thus, free flow of trade, capital and information have produced the best outcome for growth and human welfare. Therefore, it is little doubt that globalisation has positive impact on developed and developing countries. When it comes to China, ever since it formally joined WTO, great benefits has been gained from the international trade while a huge boost to the collaboration with other countries.
The issue of globalisation in China, including demonstrating why globalisation is beneficial for China, the status quo situation of globalisation in China, and the prospects and suggestions of development of China’s globalisation, will be discussed in this project.
As a developing country, by taking advantage of global markets, China has benefited during the process of globalisation, of particular concern is the economic development. All of China’s economic successes are associated with globalisation, which can be seen in each aspect of China’s economic boom (William. H. Overholt, 2005). There are numbers of way to measure the impact on China’s economy by globalization, especially in the aspect of international trade and employment.
1. International trade
Owing to the global technology advances, by a gradually falling in the cost of transportation and communication, importing and exporting have become much cheaper for many goods and services, as well as the cost of discovering the foreign buyers and sellers have declined(John Vickers, 2001).
In 2001, China formally joined the World Trade Organization, which meant China agreed to follow the same global rules governing imports, exports, and foreign investments that most countries in the world were complied with. Since then, a rapid growth of China’s export has been boosted. In a recent BBC article on the internet, it is explained that ‘in recent years, China has also become a trading giant - it is the world's fifth largest exporter of merchandise after the US, Germany, Japan, and France’ (http://news.
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As can be seen from Graph 1, dramatic changes in China’s foreign exchange reserve have taken place over the period of time from 1980 to 2007. It is astonishing that the year-end foreign exchange reserves of reached approximately 1.53 trillion US dollars, up by 43.3 percent over the previous year, hundredfold increase as 1980s’.
Source: National Bureau of Statistics of China
Accordingly, with the growth of foreign exchange reserves, there has appeared a revaluation of the Renminbi (RMB). The latest released of BOC (Bank of China) data showed that the exchange rate of the U.S. dollar against the Chinese currency hit a record 1:7.1 ever since People's Bank of China announced a revaluation of the Chinese currency Renminbi (RMB) on July 21, 2005. In the light of these contexts, benefits will be brought to China.
Above all, for the whole country, the slow but gradual strengthening of China's currency is helpful to change the growth mode of Chinese economy. As Dr. Gao Huiqing, a division chief of the State Information Center, states, ‘Advancing the reform over RMB exchange rate mechanism is conducive to the alleviation of the imbalance of China's foreign trade and expansion of domestic demand, and the promotion of “Chinese companies” competitiveness and level of opening up’ ( RMB revaluation unexpected but just right: economists, 2005).
When it comes to people’s daily life, are there any influence of the moderate revaluation of RMB will be brought to? Although there might be little impact on the general public, the small margin of appreciation will help stabilize domestic prices and bring benefits to ordinary consumers while some imported commodities becoming cheaper. Thus, the purchasing power might be enhanced in the meanwhile.
In addition, foreign funded enterprises might get maximum profit by the margin of the currency variation. Therefore, a majority of multinational companies, ranging from General Motors to Volkswagen, have their regional corporate headquarters in China, especially in Beijing and Shanghai.
In the context of globalisation, China’s labor market has undergone significant changes during the past two decades, while labor market becoming more market-oriented with the growing importance of the urban private enterprises, as collectives (state-owned enterprises) have downsized. Meanwhile, rural employment growth has slowed, and migrants have sought jobs in the more dynamic coastal provinces (Ray Brooks and Ran Tao, 2003). This phenomenon is attributed to China’s economic globalisation to a great extent. Labor market reforms are being driven in part by its accession to WTO, while giving a huge boost to collaboration with the rest of the world – outsourcing and off shoring.
Outsourcing means buying products or processed materials from other companies rather than manufacturing. In recent years, China is in more favorable conditions to implement its economic reform and industrial restructuring, which has stimulated the development of logistics industry and fostered a growing demand for outsourcing. Owing to the low-cost labor and high-technology manufacturing, while developed countries being urged to seek high-profit markets in China, outsourcing will become one of the most effective business strategies for organizations in China to achieve cost-effective performance and long-term success (Kwok Hung Lau, Jianmei Zhang, 2006).
By contrast, off shoring, it can be described as the relocation of business processes from one country to another, including any business process such as production, manufacturing, or services (Definition of offshoring, 2008). Under WTO rules, China assured foreign companies that if they shifted factories offshore to China, they would be protected by international legislation and standard business practices. Thus, China's attractiveness as a manufacturing platform is greatly enhanced.
In concrete term, with rapid growth of the volume of outsourcing and offshoring in China, there was a huge increase in labor demand. According to the latest data (National Bureau of Statistics of China, 2008), the new employment in urban areas for the whole year was 12.04 million people, an additional increase of 200,000 people over the increase in the previous year, while the registered urban unemployment rate at the end of 2007 was 4.0 percent, which was 0.1 percentage point lower than that at the end of the previous year.
Therefore, the growth of new employment opportunities and labor mobility was attributed to the acceleration of the globalisation over the past decades.
China, as a globalising emerging market, has received a considerable number of benefits from the spreading of globalisation, especially in economic terms. This essay has explored the key facts about variation in economic performance since Chinese government decided to open up to foreign investment in 1978.
There is no doubt that globalisation has accelerated China’s integration with the rest of the world, in terms of enterprise, trade and investment. As a market-oriented economy, a multi-ownership system and an emerging new labor-market, globalisation has played a key role in the unprecedented increase in China’s prosperity.
Nevertheless, during China’s globalisation, significant challenges have emerged while foreign joint ventures have come to dominate much of the marketplace. For this reason, Chinese government should take some measures to tackle these problems that would threaten its future growth.
It is to be hoped that in order to adapt new technologies and grow rapidly, the government would encourage the development of research and development or improved marketing skills in certain sectors or encourage investment in value-added sectors. (Rusdy Hartungi, 2006)
During the process of globalisation, with accelerated economic reform and strengthening in financial infrastructure, business environment in China has become more and more dynamic. To fully investigate the impacts of globalisation in this fast-changing economic climate, more studies are required to explore the negative aspects of globalisation in China. To help determine the validity of the analysis in this study, further research with larger sample across industrial and social development is, therefore, recommended.
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