What does globalization mean for China’s Economic
Jianyong Yue - 24th May 2012
The dominant view now-a-days is that China has benefited hugely from globalisation, evident in its high GDP growth. Chinese companies are getting bigger and stronger. As a result, China is rapidly industrialising itself into an economic superpower. I challenge this prevalent view on the ground that globalisation has produced a double effect, not merely positive effects for the Chinese economy. On the one hand, globalisation stimulates an export-driven high GDP by exploiting China’s comparative advantage in cheap labour; but on the other hand, it has impeded China’s industrialisation by locking in Chinese enterprises at the low-end of the global value chain, preventing them from upgrading along the technological ladder.
As we know, China’s accession to the World Trade Organization (WTO) in 2001 was a momentous decision made by the top leadership. It was a big gamble for the Chinese enterprises, because prior to the accession, they were extremely weak in every measure compared with global firms (Nolan 2001; 2004). Furthermore, they were either not consulted or excluded from negotiations). Contrary to the conventional wisdom that China’s deep integration into the global economy is a natural trend of economic development; I would argue that it was not the economic success in the 1990s that naturally led to China’s deep integration, but the predicament in the country’s reforms and industrialisation that forced China to join the WTO at its earliest possible time to keep the economy growing. Premier Zhu Rongji stated it clearly to Stephan Roach, chief economist of Morgan Stanley in March 2002; ‘If China did not join the WTO, it is impossible to restructure and sustain economic growth’.
The globalisation logic is that competition is the panacea. Competition will bail out the inefficient State-owned Enterprises (SOEs) and make them more competitive. The real drive, however,...
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