Market Dominance in Globalization in China - Case Study Example

Market Dominance in Globalization in China Student’s Name Institution Introduction Large scale economic integration has been much pronounced in most of the world’s biggest trading partners. These partners could either be individual companies or nations at large. Globalization refers to the process associated with quick economic, cultural and institutional integration among countries involved (Shangquan, 2000). The main driving factors to this unification include liberalization of trade, investments and increased capital flows, advancements in technology and pressure of assimilation towards the international standards. The main intention or goal of globalization is elimination of barriers to free exchange of cultures, commodities of trade, and other tight restrictions to enable free flow of the items and ideas that are of value to these societies (Chapter 11, 2011). China is one example of a country that highly embraces globalization nearly in all its sectors. This is due to the benefits that come along with elimination of potential barriers to trade. However, from a critical look into the benefits that are derived by the players of globalization, it is evident that there is an imbalance when it comes to distribution of the benefits of globalization to the players. There are a few beneficiaries to globalization as compared to the rate at which it takes place in China. History of China’s Globalization At the beginning of the practice of global integration, China was one of the nations that were highly opposed to the act of eliminating barriers across the nations (Tao, 2003). China did not go by most of the requirements of the globalized markets. Both globalization of trade and globalization of production were not encouraged by the government. The global political order was one of the universal principles that China was least willing to put into operation. In addition, the establishment of major global institutions such as the International Monetary Fund (IMF) was never gained support from China. There was the notion that global disorder was the best possible option and not international integration. Under Mao Zedong, it actively supported global disorder to very deep extents and the country believed that its potential to operate independently would bring about more developments domestically as opposed to the case of integration into global markets. Upon the attack on the country’s major educational, social and political institutions by China’s students, under the guidance of Mao Zedong’s peasant chiliasm; the country’s establishment was shaken. This was at the time of the Cultural Revolution that took place from 1966 to 1976 (Overholt, 2005). From the time of this revolution, China tried a number of options to regain the stability that once existed in its economy. Among these were socialism, empire, republics, capitalism, warlords, religious fundamentalism and others (Howell, 2004). All these options did not restore the economy back to its former position. This revolution was just one of the activities that led to instability in the Chinese economy. China joined globalization late, but more enthusiastically than its neighbours like Japan. At the moment, Chinese markets are more exposed to the international markets than the Japanese markets. In the year 2004, China received $60.6 billion of foreign direct investment as compared to Japan that only realized 20.1 billion of the same (Wu & International Conference on "Transition, Growth, and Globalization in China, 2006). From this, it could be easily concluded that China was a major world economic player in the global markets. The trends in Chinese globalization are not so much inclined to opening up the economy for international trade. The country is more interested on globalization of its institutions. At the moment, China is one country that sends missions worldwide. The country not only adapts to foreign technology but and international corporate management techniques but also to a wide range of foreign institutions and practices. These include the International Accounting Standards (IAS), British, U.S. and Hong Kong Securities laws, French military acquisition systems, and models of the central bank derived from the U.S. Federal Reserve Bank. With this extent of international cooperation, the globalization practices in China have led to large scale economic growths and exposure to other international business standards (Bigman, 2007). Concerns about China’s Embrace of Globalization Despite the numerous benefits that have been realized from globalization in China, there are issues of concern that have been raised due to this practice. To begin with, poverty and inequality among the people of China has increased. Globalization has led to the widening of the gap between the ‘haves’ and the ‘have-nots’ by wide margins. In the 1980s, China’s richest 10% earned less than 20% of the country’s national income. However, with continued adoption of globalization, the 2005 survey indicated that the nation’s richest 10% earned up to 45% of China’s national income (Wen, 2012). Despite the fact that China’s GDP keeps growing by large differences, the country’s rural population keeps experiencing a reduction in their income in absolute terms. The second issue that raises eyebrows when it comes to China’s globalization is loss of employment. This is due to a reduction in the number of manufacturing jobs from the year 2000. Through globalization, China now has access to more employees from the international community. This has led to reduction of domestic employees by wide extents. In addition, large scale foreign direct investment in the developing countries and other major trade partners internationally has led to creation of job opportunities abroad, and in return leaving its qualified natives with no jobs. Concerns about environmental damage have also been raised due to globalization. Rapid and large scale industrialization has led to huge environmental devastation. China has been ranked second after the United States among the world’s top emitters of greenhouse gas. As a result, more than 60 per cent of China’s rivers have been declared unfit for human life. Seven of the world’s top ten polluted cities are located in China. Demographic statistics also indicate that air pollution accounts for premature 300, 000 deaths annually (Wen, 2012). The rural areas and farmers operations have also declined from the time China joined the World Trade Organization. For example, the sugarcane province of Guangxi at one point had a sugarcane thriving economy until China joined the WTO (Gregory, 2005). This happened when the Chinese market became dominated by low quality and cheaply produced sugar from the global trade partners. As a result, the farmers’ net income declined due to this practice. All these effects have led to cases of inequality in distribution of the numerous benefits of globalization. Inequality as a result of globalization in China can, therefore, be analysed from a number of dimensions as illustrated in the following section. Globalization and Inequality in China Globalization does not benefit people equally in China. There is a rising concern on the income distribution practices. Brought about by globalization and under the influence of international economic competition, polarization China has become potentially significant, the level of social warfare declined and the income gap between the rural and urban populations has widened. The Gini coefficient is a standard quantitative tool that is used to measure income distribution. A low Gini coefficient implies there is relatively uniform income distribution in a region, while a high Gini coefficient indicates inequality in income distribution. The Gini coefficient in of China from the time of adoption of globalization has been rising steadily over the years. This is a clear indication that the gap between the rich and the poor keeps widening. In real sense, those that benefit from globalization keep reducing in numbers as their income increases. The graphical representation below (Yue, 2010) indicates the Gini coefficient of China over the past years. It is observable from the trend that for 10 consecutive years, from the year 1995, the range between the rich and the poor keeps widening and does not change in trend until 2007 when there is a low decline in the gap. Figure 1: China’s Gini Coefficient (Yue, 2010) Since globalization covers numerous areas such as market operations, technological transfers, cultural integration and other international community concerns, there are other aspects of imbalance in allocation of the benefits of globalization. These can be analysed individually as shown below. Foreign Trade, Foreign Direct Investment and Inequality Since China mainly focuses on globalization of institutions, the trends of Chinese globalization are mostly reflected in foreign trade and FDI. Through analysis of total imports and exports and allocation of the net returns due to an interaction between the two, an unbalanced trend is realized. China has realized large scale increase in its GDP from the time of adoption of globalization practices (Sharma, 2009). Despite this positive economic trend, the amount of national income that is allocated to the rural agricultural sector has remained nearly the same over the years. Unequal economic developments take place between China’s rural and urban centres. The main beneficiaries of the increased national income are the urban-based industrial corporations (Hu-DeHart & Asia Society, 2000). China invests more on these industries as a result of their profitability, but this happens at the expense of the rural sectors. As the urban sectors keep extending to international levels, other sectors of the economy keep operating at the same positions as was in the case before globalization. Technology Import and Inequality It is not only additional capital that the foreign investors carry along into China. There were also new technologies that accompanied these cash-flows. The amount of technology that was imported into China in monetary terms increased rapidly from 909.1 billion USD in 2001 to 19, 771 billion USD in the year 2006 (Yue, 2010). The major potential exporters of these technologies to China were the European Union, the United States of America and Japan. Despite the large scale importation of these technologies, the major destination place was the east area. This region received more than 70% of the technological imports into China, after which the remaining 30% was allocated to the remaining zones. There is a regional bias in the development and allocation of skilled labour in China. As a result of asymmetrical distribution of the modern technological trends, the eastern section of the country is more endowed with qualified personnel and the rural regions remain at the same positions. More of the technologies and skilled labour is allocated to the urban industrial areas. The government has not been more into expanding the country evenly to the international community. China has realized large scale economic and technological improvements from the time of establishment of globalization, but these benefits are not realized evenly across the country. Cultural Integration and Imbalance Globalization goes beyond economic operation and also focuses on establishment of new trends of business among the trading partners. China’s globalization of institutions has been biased. As a result, the number of institutions that are certified to operate internationally is limited. Globalization leads to exposure and development of better business practices that are acquired from other organizations internationally. Due to biasness in allocation of its multinational corporations, China has experienced unfavourable business competition over the years. Organizations that are exposed to the international and better competitive strategies have reduced the market share for home-based institutions. There are several institutional benefits that are not equally realized by all the business organizations in China. Organizational cultures play an important role in determining employee relations, customer relations, suppliers’ welfare and other players in the organizational environment. Equal allocation of all types of resources is necessary in order to bring about equal economic developments in the institutions. There are organizations that have indicated rapid expansion rates into the international community. This comes due to exposure to other business practices that are not domestically available. Labour Markets and Inequality There are several manufacturing and processing companies based in China. For example, China is the world’s largest paper manufacturer. In addition, the country has some of the world’s largest chemical producers. These manufacturing companies are evenly distributed across China. When it comes to relative production factors endowments, there is inequality in access to these factors. Most multinational corporations are prioritized when it comes to distribution of skilled labour. The best and highest qualified personnel are deployed to work in the foreign investments (Ali, 2011). The local corporations are sometimes forced to outsource skilled labour or use semi-skilled labour in their production processes. This leads to production of products that may not be competitive universally. The revenue distribution in the long run has more negative effects on these corporations as compared to the international institutions. Globalized institutions based in China have realized wider market operations, and as a result, they have expanded their operations to many countries (Khan & Riskin, 2001). Financial positions of these corporations are much better compared to the cases before globalization. The labour market, however, has not realized the same trend as in the commodity and money markets. Labour Unions have expressed concerns about equal market developments. Most of the investments are have been made on the financial markets and the commodity markets. The financial markets have the least players in the Chinese economy, yet they are the largest beneficiaries of international business operations. Despite the corporations growing by wide margins the welfare of the labourers has not been invested into. This has led to issue of strikes and boycotts in the international corporations. Economic Development and Inequality In the long run, China had the objective to bring about economic development that was a major challenge from the instability caused by the revolutions. This dream was realized when the government opened its markets to the international community and supported international organizations such as the IMF (Guo & Guo, 2010). In the end, the national income and Gross Domestic Product margins increased nationally. The rural regions were exploited for natural resources for the manufacturing industry. Most of the skilled labour was obtained from the urban regions while the unskilled and semi-skilled labour obtained from the rural regions. The foreign investors mainly located their premises in the eastern part of China compared to the rest of the country (Fung, Pei & Zhang, 2006). Unequal economic development that was seen due to opening up of the international markets in China has led to slow growth and economic development of the marginalized areas. Social amenities are put up in places gain directly from the international community. Taxation and Inequality National and international tax laws are made to regulate operations within a country and beyond boarders (Ye, Levine & Liu, 2011). Each economic or financial transaction is related to some form of taxation. Chinese taxation system equally applies to all corporations and carrying out business operations within. The multinational corporations are exposed to wider markets and large scale business operations. As a result, tax effect has limited impact on their overall financial returns. The tax laws are more infringing on the local companies. The number of local corporations is more compared to that of the multinational corporations. Despite the fact that these institutions are limited in number, the net gains realized from their operations are more than those that are realized from domestic operations. Conclusion Globalization of markets and products brings along several benefits to the parties involved (Veeck, 2011). The promotion of free trade has been pronounced in China for several years now. Benefits such as increased national income, GDP and creation of markets for products have also been realized. However, the people and regions that benefit from the operations of globalization from the Chinese perspective are not evenly distributed all over the countries. The benefits keep increasing as the beneficiaries reduce in number. The income gap between the rich and the poor can be attributed to globalization practices in China. References Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Ali, M. A. (2011). Globalization and Industrial Relations in China, India and South Korea: An Argument for Divergence. Rhodes: University of Rhode Island. Retrieved from http://www.uri.edu/research/lrc/research/papers/Ali_Globalization.pdf Bigman, D. (2007). Globalization and the least developed countries: Potentials and pitfalls. 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