The Impact of Globalization on China

The impact of globalization on China

THE IMPACT OF GLOBALIZATION ON CHINA

INTRODUCTION

The word "globalization", which is known by most people all over the world, shows that the activities of economy, politics, technology and culture between country and country are becoming increasingly frequent and borderless. Globalization is actually a double-edged sword. It can bring people harms, as well as benefits.

China, the country that had a poor situation about thirty years ago, has been largely growing its political and economic power over the world. Guthrie (2009) reports that China just took twenty-five years to finish economic achievements, which equates to more than fifty years ' work of many developing countries. This phenomenon is a result of globalization. It is China 's economic reforms (also called the reform and opening-up policy) after 1979 that changed its economic situation (Guthrie, 2009). These reforms allowed China to participate in the global activities. However, there is still a controvery about whether globalization is good for China. Most people think that China benefits from globalization, but some argue that although China did have great economic improvements, globalization has brought a succession of big challenges to China, which has a huge population. This paper will argue that globalization is indeed beneficial for China (especially its economic development) by comparing the advantages of globalization with the challenges, and will also discuss how Chinese government deals with the problems in order to further demonstrate the disadvantages of globalization can be lessened.

ECONOMIC IMPROVEMENT RELATED TO GLOBALIZATION

The increase of China 's post-reform economy can be shown by a range of factors. Firstly, compared with the pre-form period, the post-reform time in China has a great achievement in Gross Domestic Product (GDP). The economy of the pre-reform period lacked the abilities to appropriately distribute resources and to efficiently use technology. The average growth rates per year of 19 other developing countries between 1952 and 1981 were greatly higher than those of China at the same age, which were just 0.5 percent. The economic growth rates were extremely low (cited in Kong, 2005). On the contrary, between 1978 and 2004, China 's average increase rate of GDP per year was 9.4% (Lin, 2005). It is a very high rate. Guthrie (2009) states that twenty years ago, China 's economy stayed just at a third-world level, however today, according to GDP, its power of economy is the fourth largest among the world and if its GDP is used as buying capacity, China will become the second most powerful country next to the US.

Secondly, most places (especially cities) in China are developing very rapidly, and they are becoming increasingly modernized and internationalized. Urban development can be seen everywhere in China. Beijing and Shanghai are two typical examples. Shanghai has dramatically changed during the last ten and a half years. Pudong, which is the eastern area of the Huangpu River, was an area with only fields and old housing in the early 1990s. Today it has become an international location, which has large numbers of beautiful and modern skyscrapers including one of the tallest buildings in the world. Beijing also has the same dramatic development. Fast food restaurant like McDonald, KFC and Subway and many other international companies are everywhere (Guthrie, 2009). In 2008 summer, Beijing hosted one of the most successful Olympic games. If China did not open its door to the world and utilize the advantages of globalization, it would not afford the "expensive" Olympic games and Beijing would not even win the opportunity of holding the games.

Thirdly, the overall conditions of Chinese people have improved a lot. Nolan (2007) suggests that due to the economic reforms in 1980s, which included openness to international trade and investments, Chinese living standards improved considerably. People experienced to consume higher level of food and poverty declined. It can be seen that openness to the world trade indeed plays an important role in the development of Chinese people 's living conditions. Additionally, between 1994 and 2002, the increase of incomes of Chinese people in industries was 12.5 per cent per year. Although there was a little inflation during that time, real incomes per year still rose by more than 8 percent. The rise also happened in other working areas. The level of consumptions went up following the rise of wages (Flasseck, 2005). Whereas Chinese people spent a major portion of their money on food before the reforms, today there is more disposable income to spend on entertainment and other leisure and creative activities.

REASONS FOR BOOMING

China 's boom during globalization is not occasional, and actually, globalization gives China a larger potential and more opportunities to develop itself. Globalization needs competitions between countries and countries, and high education standards of citizens are very essential in this situation. In order to deal with the challenge well, China has done a lot of work on education and has made a great improvement in it. Before 1949, the proportion of Chinese people who was educated was less than 20 percent. However, since the education reform in 1980, the number of university in China has tripled and many universities have been in the international level. Moreover, the amount of students who study abroad rises by more than 1,000 percent and the number of returning students goes up by over 4,500 percent (Guthrie, 2009). Through sending students to other developed countries, China is able to import advanced technologies from other countries.

Since China opened its market to the world, more and more foreign corporations are entering into China 's attractive market and the foreign capital flowed into Chinese economy. Before the reforms, China lacked capital and advanced technology to efficiently develop its economy. The flow of foreign capital can just solve the problems7, so China applied many attractive policies, such as foreign direct investment (FDI) policy. Zhang (2006) states that FDI has an obvious influence on China 's economic boom. These policies translate import and export to employment and tax revenues. According to the statistics in 2003, foreign-invested enterprises (FIEs) are about 8% of the total fixed investment. They are also 57% of the source of China 's import and export. Furthermore, twenty seven percent of the total manufacturing investment and 20% of China 's total tax gains are from them. The emergence of FIEs has added 25 million jobs to the economy which increase employment opportunities by 10%.

GLOBALIZATION 'S SOCIAL CHALLENGES FOR CHINA

However, there is the other side of globalization which is not always good for China, because it cannot deal with China 's every problem, even actually, it may make them worse and may indirectly bring more troubles. After the openness policy, China implemented the privatization process of state-owned enterprises (SOEs) and its labour market was liberalized. Although the privatization process has helped China 's economy, it also exacerbates the inequality of the society in China. When enterprises are privatized, they just focus on their profits and they do not care much about the welfare of their workers. Therefore, they will use any measures to maximize their profits. Unlike the pre-reform time, people can no longer have lifetime jobs and the wages are not longer uniform within the companies. There is great wage disparity, which leads to exploitation and discrimination. Workers are more stressful, because they should work very hard and efficiently in case of being fired. Because most companies and factories are in the urban areas, the uneven development between urban areas and rural areas is very significant in China. In China, rural income has grown much more slowly than urban income and are only 40 percent of urban areas (cited in Guthrie, 2009). The Gini coefficient (a way to measure the degree of inequality) of rural income allocation, which grew from 0.21 in 1978 to 0.40 in 1998, can show that rural people 's incomes were allocated much more unequally (cited in Nolan, 2007). In urban areas, inequality is everywhere. For example, migrant workers who have the same work capacity get lower wages. Even worse, migrant workers ' wages are always irregularly paid or even unpaid (Lillywhite, 2007).

The inequality between urban areas and rural areas leads to increasing migrators at urban areas. The rapid growth of China 's economy and international trade increase this rural-to-urban migration. Since the openness of China 's market, China has become a big manufacturing country. Urban areas need more labors, which are cheap and temporary. So more and more rural people immigrants into urban areas. However, their wages are very little and live poorly. The immigration leads to many problems, such as overcrowding, violence, crime and slums. Moreover, that China has a huge population makes the situation much worse. Therefore, the stability of the society in China is largely weakened by these impacts caused by globalization.

Additionally, regional disparities are also a problem impacted by globalization. In the pre-reform time, there are small differences between one area and another area. However, because the coast region is close to the sea, international trade and commence are much more frequent at the coast area than at other places. Therefore, the coast region develops much faster. For example, on the average, citizens in Shanghai gained 12,980 yuan income for per year in 2001, which was much higher than incomes at other inland places (Guthrie, 2009). Although the way that make parts of regions rich is a good way to develop domestic economy, the differences between regions is being increasingly larger.

CHINA 'S POLICY STRATEGY FOR NEW CONCEPT

China is aware of the problems of globalization. The government has proposed new concept, and some corresponding policies to reduce these problems. A concept of "Five Coordination" is the new concept that is intended to achieve a sustainable development of China in the globalizing circumstance. According to Bi (2005), the concept aims to i) coordinate the development of urban and rural areas; ii) coordinate human development; iii) coordinate the environmental impact; iv) coordinate domestic development; v) coordinate opening up.

China has taken a series of policy actions to reduce the gap between urban and rural areas and regional disparities. Firstly, the government focuses on increasing incomes in rural areas. More investments are being put into rural infrastructure such as roads, electricity and education. The burden of farmers are reduced by agricultural tax-free policy and teaching them how to increase farm productivity. Furthermore, the government also creates more non-farm work opportunities in rural places in order to achieve diversification of work (Bi, 2005). Since the government applied these policy measures in the rural places, economies and people 's conditions have been improved. People in some rural places are even much richer than urban people, such as Huaxicun, which is one of the richest hamlets in China.

Secondly, the Western Region Development Strategy and the Northeast Old Industrial Base Development Strategy are two typical strategies for solving regional disparities. The former one has made much progress on transportation, means of communication and electronic power in the western area. The latter one was more efficient, because it innovated mechanisms and institution such as SOE reform in the northeastern area. These two policies both have positive results (Bi, 2005).

DOMESTIC ECONOMIC PROGRESS VS. INEQUALITY

Domestic economic progress is weakened by inequality, but for China, the improvements caused by globalization outweighs the challenges. Firstly, the emergence of inequality does not mean that poverty increase. On the contrary, poverty actually decreases after the reforms. The World Bank estimates that China 's poverty population decreased by 167 million (It decreased from 542 million to 375 million in the 1980s). Compared with the four other Asian countries (India, Pakistan, Indonesia and Bangladesh), which have the largest poverty population, according to the international poverty line, China now has the smallest poverty population. The population is expected to decrease in the future (Hu et al, n.d.). Furthermore, the level of poverty in China has actually changed. Most poor people in China now are in relative poverty, rather than absolute poverty. According to Smith (2008), relative poverty implies that people are able to live with adequate food, clothing, clean water, and shelters; however, they cannot afford other things such as telephones, because their incomes are exhausted by their basic living resources. Before the reforms, a very large number of people lived in absolute poverty. Many people were uneducated or illiterate and troubled by starvation or hunger, avoidable disease (absolute poverty situation).

Secondly, the gap between the rich and the poor caused by inequality is much better than having the entire population live in relative poverty. Having several rich places existing in the country is much better than none at all. Before globalization, due to its poor economy, China could not feed its large population. In that time, people spent most of their incomes on their food and clothes, leaving little for other things. The potential of people were limited by economy and political situation. Nowadays, people have more chances and are free to promote themselves. Many people live affluent lifestyle. Although a number of people are still in relative poverty, compared with past, China has gained more benefits than losses from globalization.

Thirdly, efficient policies are able to decrease the inequality. Transferring investment capitals from cities to rural places, the Western Region Development Strategy and the Northeast Old Industrial Base Development Strategy are good examples for dealing with the inequality. In order to achieve China 's new development concepts, the government gradually improves its policies and is searching for more efficient ways. Although the inequality cannot be vanished, gradual improvements are able to minimize it.

CONCLUSION

Although China has to face not only the challenges above but many others directly or indirectly brought by globalization, dramatic GDP growth, the huge changes in its cities, the development of people 's lives and other improvements can be apparent after China 's openness to the world. Globalization does give a great help to not only the country but also Chinese people. Globalization has allowed China to attract foreign capitals and learn advance technologies and gain knowledge from developed countries, because without globalization, communications and commences between countries cannot be so frequent and may encounter more obstacles. As for the challenges, they do not mean globalization is negative. Compared with China 's boom, the challenges are less important for the country. In addition, China is always researching and planning strategies to overcome these challenges and have made progress. However, China still has a long way to develop itself in every aspect. Although China 's economy is booming, there will be more and more bad impacts of globalization, so the government needs to be very careful and establish more specific and better-designed strategies to lessen potential damages.

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