International & Pacific Asian Business - China - Case Study Example

International and Pacific Business Student Name: Student Number: Course Code: Instructor: 28th April, 2013. China’s economy took a bad beating as a result of World War II. Japan, its Asian neighbour, had always taken any opportunity to raid Chinese boundaries and get away with any resources they could lay their hands on. In addition to losing lots of its youth who had enrolled in the army so they could defend their country, it lost a host of countries which it had before then controlled. Much of the Indo-Chinese region was lost to Japan, who wanted to control these too. Towards 1950, and under the capable leadership of Mao Tse-tung, China’s fortunes took a turn for the better. Chairman Mao, as he was fondly referred to, came up with policies that would ensure China’s path to recovery. The policies promised better economic performance than China had before World War II. As fate would have it, the formulated policies were meant to fast-track development so that the country could find its footing again. For a start, the agricultural sector was used as a basis for industrial revolution because as things stood, a well fed population could be relied on to deliver the much-needed changes. Land reforms came in handy here. The ownership of land in the rural areas was changed to suit a model where more land could be accessed for farming. In the meantime, education was made more practical for women so that the new 9 year education cycle would help women gain an edge through knowledge. Before the world war, China’s GDP mostly came from agriculture. However, in the global arena, it would need to export more than its fair share of agricultural produce. Liu (2005) contends that a sector of trade that enabled China to prosper was that which dealt in the sale of household goods. As a matter of fact, the domestic appliance industry is hugely dominated by Chinese companies even at present. The biggest policy shift that made China the economic powerhouse that it currently is is those that insisted on an open market policy for international trade. Globalization has created a very big market for Chinese products in the world. However, Heilmann and Shih (2013) portray a further policy shift in the 2000s that has since created a difficult situation for foreign firms. First off, Chinese leaders sent representatives to foreign countries so they could study what these countries were doing so as to become strong economies. For instance, the American economy seemed not to have taken much beating from the World War II because it appeared to be advancing every waking day. Sirkin et al (2008) posit that America’s success may have arisen from what the Chinese thought were policies which mainly favoured international trade. What might not have been in their knowledge was the fact that globalization may have been responsible for its success. All along, China assumed that the Japanese model for development would work equally well. On close inspection, Chinese leaders realized that they could chart a different path for their success. Developmental policies meant to create a better China focused on employment too. To realize this dream, China increased its agricultural exploits to include aquaculture. In doing so, more jobs were realized for its populace. Hishamunda & Rohana (2003) point out that aquaculture, the basis of fisheries, would not only serve to put food on the table for many a Chinese, literally and figuratively, but also serve as exports. In this respect, the balance of trade in China would also take a turn for the better. Normally, a country that exports less than it imports suffers a drawback that may affect its economy directly. Land reforms came in handy in trying to avail more arable land for agriculture in accordance with the Agrarian Revolution. In essence, the land was owned by the central government, which would allow people to take it for a certain period, so long as they used it productively. Communism, which had earlier been advocated for by Mao, was solely responsible for this policy. For a larger part, this may have brought forth more positive results than negative ones. Hin (1999) places emphasis on China’s perpetual shift to a more market-oriented model of land ownership with advance in time. In the current model that was adopted in the late eighties and early nineties, land ownership fits the western model where an individual can own land though the government retains overall ownership. Having maintained a steady growth of over 10% in its GDP for well over three decades, China has realized an exponential growth in its middle class. Nearly 50% of China’s GDP relies on the service industry with most western companies opting to use it as a point for drawing cheaper labour. Hu (2010) opines that while this is true, it is mostly responsible for the increase in standards of living among the Chinese as more people afford to get jobs easily. Further, the more foreign companies use Chinese labour, the more China gets a chance to advance technologically. For instance, IT companies like IBM and Apple Inc. have assembly plants in China. This provides China with points from which they can learn to improve their own IT firms that manufacture similar products as those produce by IBM and Apple. For long, the girl child in China was not focused on as a resource whose potential could be tapped and made more useful in wider fields. The notion that women were inferior was dealt a blow when they were afforded a fair share of opportunities to go to school and learn. Introduction of an education system that could land them basic skills within 9 years came as handy in bringing up a generation of averagely educated women, which proved far much better than what was available before. The basic six-year elementary education followed by a three-year junior high school system of education registered fairly across the sexes. It also created a high number of students who proceeded further to higher institutions of learning, effectively creating a huge base of fully-skilled workers. These would prove to be very important as from the mid eighties as they increased the pace at which China’s technological advances moved. Guo (2005) emphasizes on this system being a perfect recipe for the availing of a highly-skilled workers. Coupled with the Confucian set of beliefs on hard work, China was ready to go. Finally, countries that rely on imports from other economies are never known to progress faster than their counterparts who export more. For this reason, China has come up with policies that mainly favour its exportation of goods than importation. The policy of self-sufficiency, earlier championed by the political class, has seen China maintaining a positive balance of trade whereby it exports more than it imports. Saxena & Cerra (2002) draw a picture of a pragmatic China that would devalue its currency, if only to twist trade in its favour. This would always ensure that their goods sell for low prices in international markets, yet competing companies from foreign countries would always strive to maintain a certain high price tag for their goods, which are similar to cheaper ones from China. They would always end up losing to China. The aforementioned factors that have led to a very successful Chinese economy may come with challenges. These challenges may pose difficulties to both China and other foreign economies. For a start, the people of China have experienced a shift in their fortunes as the standards of living have gone up. The problem with this is that the fortunes have only shifted to favour the rich, meaning that the gap between the haves and the have-nots has increased exponentially. This only means that policies need to be made so as to ease this situation. Knight and Ding (2012) propose that growth should always afford everyone an equal chance at earning the right wages. In having a robust economy that is mainly driven by state-owned business entities, the case of foreign direct investment becoming difficult is certain. China employs protectionist policies that ensure the indigenous companies, which as stated before are state-owned, benefit at the expense of the others. In trying to protect its indigenous industries, China loses a lot of FDI from countries that would like to set up shop, but would not due to the policy regulations that make it difficult to operate in China. Google is a good example of a company whose operations are limited due to policies that favour its Chinese rivals like Bing. Currently, china is suffering from a great rural-urban migration. This is blamed on the fewer opportunities available for rural folk. Such a movement threatens to reduce the available labour that is tasked with tending the agriculturally fertile lands back in the rural areas. The industries where migrating rural folk find work in also largely employ practises which expose their employees to risks as they do not offer enough protection for them. Child labour is equally rampant in these industries. A further damage is obvious as China’s cities are the most polluted worldwide. Mcgranahan & Tacoli (2006) attribute the high cases of cancer among city residents to the poisonous fumes from China’s heavy manufacturing industries. China’s regulation of its trade with other countries does not sit well with its FDI partners. This may result in the other countries creating technicalities that may in return come to haunt China in the future. China’s construction companies are currently involved heavily in the development of infrastructure in the wider Asia and Africa. If most of these countries withdraw their contracts or cease to work with Chinese companies, a death knell to China’s rapid growth may be sounded. In this regard, it would be only needful that China levels the playground for all the firms that set up shop in China. Globalization requires that trade practises be fair, and this will only be realized if policy regulations employed to protect indigenous companies do not force others to run into losses. Other emerging economies have taken China’s growth positively and are working towards making their own models. The BRICS economies, which consist of Brazil, Russia, India, China and South Africa, have sought to create a single currency which they will be using to trade among themselves and other countries that are willing to accept it. This may come as a surprise, but if the idea is not well thought out, china may not accept the currency within its borders. The main reason for this arises from the fact that China devalues its currency frequently and may be tempted to manipulate the common currency too. In conclusion, the rapid growth of China’s economy has not come as a surprise. It has had to undergo several changes for it to experience the growth that it currently enjoys. Some of the factors that have made it what it is today majorly focus on shift in policies that have since enable the country to set itself on a growth that is so far unrivalled. Industry policies have largely increased the China’s output, which is then exported to other countries. China exports more than it imports, which places it as a healthy economy that may not easily fall to crises that affect other economies. The aggressive tactics that China employed included having to use protectionism so that its state-owned industries may have it easy in the markets within. Although it serves as a big market for international companies like Volkswagen and general Motors, China’s underhand tactics in regulating companies like Google may not auger well with other foreign companies, thus resulting in them shying away from investing within. The rate of rural-urban migration robs China of a workforce that can be relied on to keep its farmlands constantly productive. It would be prudent for the leadership to urge its people to seek to develop the rural areas instead of running away to find employment in industries that may not exactly afford their employees safe working conditions. The pollution in China’s industrial cities creates many cases of terminal illnesses among the residents who live in them. This should be a factor that discourages people from leaving the rural areas to seek employment in these cities. That more people overlook this fact to still relocate to industrial cities in search of employment points out to a fact – high unemployment rates. The BRICS group of countries have over time generated ideas that may see them dominate the world’s economy in times to come. The rate at which these ideas are put to practise may hinder the realisation of true world dominance. China may partly be responsible for it as it is seen to employ underhand tactics in dealing with other economies. References Guo, Y 2005, Asia’s Educational Edge: Current Achievements in Japan, Korea, Taiwan, China, and India, Lexington Books. Heilmann, S & Shih, L 2013, “The Rise of Industrial Policy in China, 1978 – 2012”, Harvard-Yenching Institute Working Paper Series, pp 1 – 7. Hin, LL 1999, Urban Land Reform in China, St. Martin’s Press. Hishamunda, NR & Rohana, PS 2003, “Aquaculture Development in China: The Role of Public Sector Policies”, Food and Agriculture Organization of the United Nations – FAO Fisheries Technical Paper 427, FAO: Rome. Hu, A 2010, China in 2020: A New Type of Superpower, Brookings institution Press. Knight, J & Ding, S 2012, China’s Remarkable Economic Growth, Oxford University Press. Liu, L 2005, China’s Industrial Policies and the Global Business Revolution: The Case of the Domestic Appliance Industry, Vol. 15 of RoutledgeCurzon Studies on the Chinese Economy, Routledge. Mcgranahan, G & Tacoli, C 2006, Rural Urban Migration in China: Policy Options for Economic Growth, Environmental Stability and Equity, Working Paper 12, IIED. Saxena, SC & Cerra, V 2002, An Empirical Analysis of China’s Export Behaviour, Issues 2002 – 2200, Intrenational Monetary fund Working Paper. Sirkin, H, Henerling, J & Bhattacharia, A 2008, Globality: Competing with Everyone from Everywhere for Everything, Grand Central Publishing. Read More