Globalization is the interconnectedness of the world economies through different rules set by the international institutions i-e, WTO, EEC, NATO etc. It is one of the major issues faced by many developing international organizations. It is important for organizations to collaborate internationally in the context of globalization of the economies as to reduce the incongruity of multinational businesses.
With the increased demand for globalization, many universities are now incorporating globalization related studies as a part of education as to increase intercultural understanding through processes of organizational change and innovations. (wikipdeia, accesed on 2nd july, 2010)
Critics view globalization as a worldwide drive towards globalized economy with dominated by banking institutions etc not accountable to democratic processes, a capitalist (book)
Globalization is the new jargon that has come to dominate the world since the 90’s. Now the process has reached its height. With the increased dependency on the market economy and renewed faith in private capital and resources, resulted in many international organizations operating in the developing countries. Till the 90’s the Indians were facing problems due to barriers to trade but the scenario had changed due to the increased investment and financial flows which resulted in boosting globalization.
PURPOSE OF GLOBALIZATION
Globalization has become a necessity in today’s world due to its impact on the developing/developed countries. There is much access to developed countries resulting in easy technology transfer resulting in higher productivity and has raised the living standards of people. It provides greater opportunities for those who have to access larger markets around the world. Cheap imports, more technology is available and increased capital flows are experienced by the countries involved in the global markets. They need to cope with certain policies created by the international policy makers like WTO, EEC etc.
IMPACT OF GLOBALIZATION
Positive Impact: Globalization is the new catchphrase in the world economy, dominating the globe since the 90’s of the last century. With the increased reliance of the people on the private capital and resources, international organizations are playing an important role in the development of developing countries. Globalization has brought up many opportunities resulting in increased productivity and increased flow of capital within the economy. It has also resulted in increased investment providing greater job opportunities which has improved standards of living for the people.
Negative Impact: Globalization has also thrown open varied challenges such as inequality of purchasing across and within different nations resulting in a widening gap between rich and poor, exploitation of labor in the name of cheap labor, environmental deregulation, lack of democratic accountability and environmental deregulation has spurt open worsening in the economic situation. Another negative aspect of globalization was that a majority of third world countries stayed away from the entire limelight.
BENEFITS OF GLOBALIZATION
The gains from globalization can be cited in the context of economic globalization:
Trade in Goods and Services – International trade ensures the allocation of resources resulting in increased productivity. As the matter of fact, the trade barriers in developing economies only hinder growth. The developing economies can benefit if all the resources are utilized efficiently. This is where the importance of reducing the tariff and non-tariff barriers crop up.
Movement of Capital – production of the developing economy is increased due to flow of capital across the countries. The Foreign Direct Investment (FDI) plays an important role in the development of an economy. With increased FDI, there would be more investment and more saving of the people of developing country receiving FDI resulting in over all benefit of the society in the form of enhanced standards of living and high productivity.
Financial Flows – The capital market development is one of the major features of the process of globalization. The flow of capital ensures technology transfer, production of locations receiving a comparative advantage and by large the global foreign exchange markets are improved. The flow of capital and proper allocation of resources across countries increases financial stability across the world.
Other Benefits- Globalization is advantageous for the developing/developed nations. Due to globalization business markets boundaries in the world have ended; one can make his product available in any corner of the world. Countries opt for globalization because of the reason which include increased competition, comparative advantage, economies of scale and access to a greater range of products and services (kilgour, 2000). globalization results in lower inflation rate which is favorable because with the increase in competition”, the prices fall. Another possible benefit is faster technological and, productivity growth because increased international competition has obliged business generally to innovate more rapidly since the ’70s.(kilgour, 2000)
In today’s world, no country can survive without globalization especially the developing countries. Organizations need to operate globally due to increased competition. Without international operations, the organizations cannot sustain in the market for a longer time. In the developing countries, globalization is an important process due to the immense benefits provided. It helps in the over all economic growth of the country by the foreign investment triggering saving within the country which could be used in the other investment. Other benefits are also a part of globalization which vitalizes it role even more. So, globalization is a step for developing countries in the run to become developed.
ACTIONS NEEDED BY THE DEVELOPING COUNTRIES
â€¢ Greater investment in education, health and public infrastructure is a guaranteed win-win.
â€¢ Restarting the truly multilateral liberalization of the global trading system, which should address the key issues of the critics, including food trade, labor agreements and the environment (kilgour, 2000)
â€¢ The creating a good investing climate based on rule framework which will increase job opportunites and reduce poverty.It involves more than simply a crave for high levels of external investment. It is about promoting an environment to discover the entrepreneurial potential of the domestic private sector, especially small and medium scale enterprises. It is about broadening national poverty reduction strategies to enable trade and investment and stimulate the private sector, and to create employment on which the poor depend.
Globalisation challenges facing China
The aim of this report is to identify the challenges that globalisation presents or is presenting to The People’s Republic of China, and show China’s reaction to these challenges.
Globalisation as a whole refers to “shift toward a more integrated and interdependent world economy.” (Hill, 2009, p6). Globalisation can be looked at from a market point and also a production point. A market point referring to creating a global market place where markets that were once separated by different barriers become one. Hill (2009). Globalisation of production refers to the manipulation and taking advantage of the differences related to factors of production worldwide, for example costs of different factors may vary. This is called out sourcing of production. Hill (2009)
China is a perfect example for globalisation ,with a population of 1.3 billion people and with a culture dating back 6000 years, these large numbers and strong cultural background form a both a large market and a large work force. Politically, China is governed by the CCP (Chinese Communist Party).
(Kahn, 2009) “China is still perceived as one of the key players to lead the world out of recession.”
Secondary research has been used to compile this report. With an aim of getting academic facts about globalisation, and up to date information on China, both text books and internet sources have been used. The main text book for the research for this assignment has been International Business by Charles W.L. Hill.
2. China’s population
With just over 1.3 billion people, china has the biggest population and is the world’s largest country .As the world’s population is approximately 6.7 billion, china represents almost 20% of the world’s population .
2.1 China’s economy.
Since the introduction of the economic reforms in the late 1970’s which focussed on decollectivization of agriculture, liberalization of prices, decentralization of economic production, granting more independence to state-owned business enterprises, opening up the country to foreign direct investment; china’s economy has had substantial growth.
In the period of 1990-2004, it’s economy grew at an average rate of over 9.5%,the highest growth rate in the world. In the fiscal year of 2007, china’s GDP stood at US$3.4 trillion making it the world’s third largest economy by GDP, after the United States and Japan (CNN 2009), and in 2009 surpassed Germany becoming the 2nd largest economy in per capita terms, despite global economic slowdown.
Much of the success is attributed to china’s slow and steady approach in implementing the reforms.
China’s economy is expected to to grow by 9.5 % in 2010 (The State Council Development Research Centre, a leading state think tank)
From figure .2 we see that China’s output grew by 10.3% in 2010 to, slower than its growth in the previous quarter (11.9%), but not substantially slower. Inflation also eased, going below the central bank’s official target of 3%.
The slowdown is not necessarily bad news, china’s economy is now operating at full capacity.
Globalisation is “is the objective trend of economic development in the world today, featured by free flow and optimized allocation of capital, technology, information and service in the global context. It is the inevitable result of the development of productive forces and advances of science and technology, especially the revolution of information technology since the 1980s and 1990s.” (H.E. Ambassador Zha Peixin At Chinese Economic Association Annual Conference (14 April, 2003))
The influence of globalization on countries at different stages of development is very different
China has taken advantage of increased globalisation to promote its growth and development. over the past 30 years china’s share in world trade has increased by over 20 times . Trade dependence rose from 10 to 36%. Foreign Direct investment has increased by almost 2009 over the previous year making China the third largest recipient of FDI . According to a modular study on the synergy of FDI conducted by the Development Research Centre of the State Council, China’s GDP recorded an average annual growth rate of 9.7% over the past 20 years, of which 2.7% was attributed to FDI.
These effects of globalisation have helped the Chinese people in terms of improved lifestyle and annual income and china has been labelled the next super economic power.
In 1999, the world bank and the united nations development program issued a report which points that “the number of poverty stricken people is increasing in many places in the world but china is an exception”. The number of rural poor reduced from 250 million in 1978 to 30 million in 2000 and poverty incidence from 30.7% to about 3% in 2000.
However, along with these numerous opportunities ,came hefty challenges. This has led Chinese government to adopt a series of strategically significant policies so as to address the challenge of economic globalization
We shall look further into these challenges in the following sections