The Rise of China, its effect on Reshaping the Business Environment and how this Affects Multinational Enterprises - Essay Example

Download file to see previous pages Disadvantages include increased competition in the export market and increased competition for raw materials. In addition, it is unknown what China will be like as a world economic leader and what effects this will have on the rest of the world. Introduction The economic boom in China has resulted in continued significant growth to the Chinese economy and the growth is predicted to continue. Already China has the second strongest economy worldwide and projections indicate that this growth is likely to continue. Calculations suggest that by 2035 the economy of China will have completely overtaken that of the United States, who is the current economic world leader. As the economy of China continues to grow, there is already evidence of the country reshaping many economic variables and the environment for businesses. There are a large number of implications for businesses as a consequence of this growth particularly those which span multiple countries. A multinational enterprise (MNE) is a corporation or enterprise that has its headquarters in one country, and operates in other countries also. This operation may be in terms of having distinct branches or stores in other countries, or it may mean outsourcing production or a portion of production to a different country. MNE’s vary significantly in size, with some being small, and others large, with budgets that are so large they exceed the gross domestic products of some countries. The countries in which MNE’s have their headquarters play an important role in the way in which they operate and their ability to generate revenue, however the international economic situation also plays a significant role. The rise of China has already significant affected economic relationships and trends internationally and there are strong indications that this trend will continue. As a consequence, the rise of China has many potential effects for MNEs including both positive and negative effects. The Economic Rise of China The financial crisis which has been affecting enterprises, governments and countries worldwide has provided significant opportunity for the economy of China to strengthen itself and emerge as one of the fastest developing economies worldwide. The economic boom that has caused this rise has been steady for four decades, and indications suggest that the rise is sustainable. Already it ranks as the second strongest worldwide economy, after that of the United States. It is the largest exporter of products worldwide, and the second largest importer of goods. It has been projected that the economy of China will be stronger than that of the US by 2035, and will be twice the size of the US economy by 2050 . The growth of China’s economy has always been independent of the US, having low growth when the US economy was soaring, and now growing rapidly as the US economy is having significant difficulties. As China is gaining economic strength and power internationally, the consequence is a shifting of economic power and the redistribution of economic linkages as well as the creation of new ones. The continued growth and development of China’s economy will eventually result in the displacement of the US as the predominant market economically, resulting reassessment and changes within all major economic markets worldwide. Before the financial crisis, China used an export model for its economy, exporting goods to ...Download file to see next pagesRead More