HSC Economics: Globalisation- China Essay

Topics: International trade, World Trade Organization, Economy of the People's Republic of China Pages: 5 (1794 words) Published: October 12, 2014
Analyse the impact of Globalisation on an economy other than Australia. Chosen Economy- China
Globalisation is the growing interdependence of the world’s people and world trade. It involves shrinking space and time and breaking down borders in order to allow people access to new technology, markets, tools and organisations such as the WTO.

Globalisation impacts positively on China’s economy by increasing trade and GDP, encouraging foreign investment from Transnational Corporations (TNC’s) and national economies, providing extra opportunities in the labour market and exposure to global markets, and in the case of China, lifting 400 million people out of poverty between 1978 and the present day. Adult illiteracy rates have also fallen in China from 37% to 5% between this time, and infant mortality rates from 41 per 1000 births to 32. However, these positives come at some cost. Negatives such as environmental damage influence the sustainability of growth in China, which is nearing its peak. Other negatives include short-term inequalities in the distribution of income and added competition for domestic producers from foreign competitors. These positive and negative impacts need to be identified and managed, and this is where international treaties and organisations, as well as governments, intervene to ensure that development strategies provide maximum benefit for an economy with minimal negative impact.

Thanks to Globalisation, between 1990 and 2000, the number of people living on less than one US dollar per day in China fell by 170 million. During this time, the population grew by 125 million. However, 135 million people still live on less than one US dollar per day, mostly due to their geographical position within China making it hard for industry to develop. This shows the limit of the positive impact that Globalisation can have on an economy like China without Government intervention to spread growth to these inconvenient areas. The Chinese Communist Government is the principle means by which Globalisation’s positive impacts can be maximised for the entire economy.

The Government has shown its ability to spread growth since the economic reform from a centrally planned system to a free market system in 1978, especially through allowing non-state enterprises the opportunity to grow. For example, in 1996, state enterprises accounted for only 28.5% of China’s total Gross Industrial Output Value, with collective owned enterprises accounted for almost 40%, and individual owned 15.5%. The Governments “Open Door policy”, added to by its recent inclusion in the WTO, also encourages foreign investment and trade. This provides new capital, new technology, managerial skill and labour training. Added competition has made domestic businesses more efficient, causing an increase in quality and price. Without such a policy from the Government, the efficient use of China’s natural and labour resources would not be maximised, and therefore Globalisation would positively impact on China’s economy to a lesser extent.

The recent trade trends show how successful the Government has been in maximising the positive impacts of Globalisation. China’s exports in 2005 were valued at $752.2bn, its imports at $631.8bn, creating a $120.4bn trade surplus. As a percentage of GDP, this translates into $962 per capita increase between 2003 and 2005. The Real GDP rate has risen an average of 9% between 1995 and 2005, the total volume of exports increased by 19% and imports by 16% during the same period. Trade is an important indicator of the positive impact of Globalisation, as it contributes to a higher overall GDP, which increases the standard of living of the Chinese people. However, China’s financial markets are underdeveloped, and the level of regional development unbalanced. It is still dependent on bank loans in corporate finance and consumer credits. Despite this, the levels of Foreign Direct Investment (FDI) between 2002-3 were the highest in...
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