China in the World Economics - Essay Example

The trading sector of China combined with her large population and recent economic growth had added fuel to its international claim to go global. Problems to infrastructure and other developmental challenges are also important while considering China's growth. As a successful trading nation and a partner in world trading system, China also poses hope for offering more opportunities to business and developmental potential within her ever-expanding economic space. With issues like WTO compliance, Human Rights, Intellectual Property rights and business and international labour or other services sector that pose veritable concern for European and American partners, China's hope towards the "China's Century" goal is quite undiminished. So what can be the consequences of such a hard-core optimism Can China really beat the rest of the world economic and political superpowers The vast size is alluring. The power it can assimilate is thus threatening too. From being the largest coal producer in the world, along with things like cement and steel, China is one of the major contributor in cost cutting and low cost manufactured things that find their way almost everywhere in the world, like Wal-Mart. It is also the second largest consumer of energy in the world and thus the third largest importer of oil. One of the second largest holders of foreign-exchange reserves in dollars, China seems like the future of 21st century. WTO report on China demonstrated that it would supposedly produce more than half the world's textiles by the end of the decade.1 The CNN report also says that China: "has a permanent seat on the U.N. Security Council, it is an acknowledged nuclear power and it is one of only three nations capable of independently launching humans into space." China is undoubtedly a US rival and after the consecutive militant and destructive wars it has waged has paved the path for China a little too easily. The inward-looking communist state was opened up to Western economy and capitalist agenda when the 1970 US foreign policy included such an economic rapprochement with Mao Zedong. Thus it helped US in obtaining a pro-alliance support against the Soviet Union, who was their immediate problem then in 1972. Shanghai has now become one of the largest economic hub of China and extreme development is taking place everywhere at a speed rate that is quite not comfortable for other actors in the international system. The massive reserve for cheap labor is one of the many advantages of countries like China, and especially for China, who can have both labor and high skilled intellectuals at a very large quantity. China's industrialization is thus being driven from home but with the help of international actors like transnational corporations. They are outsourcing to China and exporting from there too, thereby increasing import. Bound up with the growth of mammoth discount retailers in Western markets, that are driving business like crazy particularly in the US, China is getting all the incentives for producing toys, shoes textiles and electric appliances for as less as possible but with durability and other advantages. In 2005 December Airbus made a motion in Beijing. The deal included something similar to what General Motors did in US. Apart from their intention to sell 150 passenger jets to China, which is worth a several euro billions, Airbus is also considering building an assembly line in China, its first ever production base anywhere outside Europe. Similarly General Motors is doing fine in China even after suffering huge loss at other international sites. China's economic growth is good news for U.S. exporters who can flood the market with cheap Chinese export goods and reap huge profits in the US. But this also has a flip side to it that is being faced by US policy makers. Since China is reputedly and uncomfortably almost negligent of WTO guidelines that often cannot be neglected by US businessmen thereby adding cost to their production, the Chinese business and working conditions are sometimes compromised and almost neglected thereby not affecting the production cost that much. Bids by Chinese state-owned firms to purchase various U.S. owned firms again raise lot of national security and economic issues over and over again, ironically since US has freely entered Chinese market almost always owning the firms but the opposite is posing quite a threat to the US firm members. Other developing countries also believe that FDI in their country is almost being snatched away by lucrative and cheapest offers by China. Loss of domestic labour and manufacturing jobs in superior countries have made not only valuable contribution to China, but has actually caused a widespread concern for the decrease of wage in home countries, who have to now compete with the low wage market of the Chinese labors. China attempted to takeover Lenovo Group Limited, in December 2004, now owned by its government Another important occurrence like the China National Offshore Oil Corporation's (CNOOC) bid for the U.S. UNOCAL, an energy company in June 2005, was so alarming that CNOOC was forced to withdraw the bid by the US Congress. Taken all this into consideration, compared to the US the living standards and economic condition of China is still far lower than United States and Europe. However, Chinese cost of living is low. Again, all comparative prices of goods and services in China of similar standard or quality are significantly lower than US and other international states. Thus when actual purchasing power of a Chinese citizen is taken into account, the strength and steady growth of Chinese economy is reflected. This has also been affected by factors like a surge in foreign direct investment (FDI) in China. China's capital growth depends on it a lot, but this continual FDI infected economy have seriously cut down investment barriers even those under China's WTO commitments. The surge in purchase power thus has also increased the Chinese demand for imports. Even then Hong Kong is held to be the largest investor in China, followed by the US and Taiwan. Thus, the challenges that face Chinese economy today are concerning reforms connected to Chinese economy and initiatives that must follow such an important growth spurt since wrong implementation can cause substantial harm to future growth, thereby hindering it. State-owned enterprises are under severe threat. One-third of Chinese industrial production depends on them. Thus government funds are diverted to them for support thereby reducing the hope for capitalist markets. Depending on subsidies even when and heavy loss are incurred by them such unprofitable firms make governments fearful about reducing control over trade barriers. Such an act can kill all of these firms and fall into the fate of inevitable bankruptcies allover in China. Similarly the decadent condition of the Chinese banking system poses a threat from foreign competition. Social stability is at stake as issues of government corruption come to the fore that are revealed through such certain glaring mistakes like rising level of pollution, and instances of land seizures. Pollution in China poses not only a great health risk but also the governmental disregard for environmental laws at the cost of globalization and economic growth threatens serious Human Rights violation to a dehumanizing degree. This is a major issue that undercuts the Chinese claim to being superpower. The water is unsafe for drinking inmost of the suburbs and villages. Crop failure is posing similar threats to the main economy of China that has sustained this agrarian society self-sufficiently for so long. Again as a communist country the wide disparity in income has given way to greater tension, politically as well as ideologically. Foreign firms like the US find the lack of transparency in China because quite alarming since in absence of all legal validity and authenticity business in the modern time would be troublesome for most of them if they wish to retain foreign customers with regard for intellectual property rights and similar rules and regulations that validate the worth of their purchase. Thus a short-term evaluation of growth in China is quite positive pitted against the long-term sustenance when it is quite dulled by the consideration of so many factors that threaten this optimistic outlook into a greater economy. Hence, the challenges to Chinese economy are many. From news of the central government's failure to crack down on illegal coalmines2, to undervalued currency, China's exports are precariously based on the low fixed exchange rate that China has maintained since 1997. The Yuan is fixed at a rate of approximately 8.28 Yuan per U.S. dollar. This was held to be undervalued at least by 37%. Until China did appreciate its currency, due to international and political pressures on China the significant appreciation of the Yuan did have an effect in stabilizing China's rapid economic growth invariably obtained through export. China is generally seen as an upcoming competition for the other international actors, but it has actually helped these international countries, especially Europe and United States get more business, now that China has better ways of providing them with cheaper supplies and labor! Hence China is also good news for these superpowers. The U.S. Commerce Department data has made repeated analysis by showing how exports to China have increased dramatically. It has almost grossed over and beyond 80% and ever after Beijing became a member of the WTO since 2001. Beijing is threatening the powers that has been in the grip of Europe and Us, since the World War II and almost always with the West since the rise of Industrial Revolution. With Japan as the emerging and established threat, China too is being seen as another bigger threat due to its population and growth rate. Most importantly China is instilling fears of destruction of status quo of Western powers through its potential for unknown heights of economic power and technological growth. China's integration into global community must ensue with China being free of any internal trouble and get more politically global by understanding the much-debated condition of its nuclear-armed PRC, which may topple growth as it continues to violate WTO rules. China has shown remarkable growth in sectors like chemicals, agriculture sophisticated, cheap yet high-tech products that has given a sudden lift to the way technology is being flooded into the markets and democratically being possessed by a generation who give lot of hope to the future thereby ushering in an age of technological revolution. Significant wage reduction in manufacturing these products and the cheap availability and has a great effect in cost differentials outside United States and when measured against the more upcoming countries like China, Korea, India, Taiwan and others who are making this the gradual shift happen right now. Shift of U.S. production into China mainly outsourcing business is a problem that seems superficially to shift US economy into China, but both countries are adjusting to this globalization phenomenon by both trying to reap best harvest out of it. No one is a loser here. The shift was a necessary outcome, and if not for China, the target country would have been another one- anywhere there would have been the possibility of such similar benefits that US and Europe is reaping out of China now. Ironically even the alarming figures given about China and Chinese consumption of oil and its effects on the global rise in oil prices are over appreciated and overestimated too, sometimes out of fear of such a future poverty. Again the sudden effort at industrialization for such a massive agricultural country is supposed to take such a turn since the basic need is being fulfilled here. This shift itself is huge and is amounting to a huge change, which is making this sudden shift from self-sufficiency to a huge demand for surplus energy outside its own capability (for providing for herself), look strikingly large. Especially when such figures come within the range of global attention suddenly making China look surprisingly threatening. While countries like US have am average energy consumption multiple times higher than any other country in the world. Japan, EU and United States, import something around seven to twelve million barrels of oil per day respectively while China only import or can afford to import something around three million barrels of oil by comparison per day and the demand is increasing but all is in the hands of its future performance and good economic reforms that is not quite strong at the moment but nevertheless happening, slowly. Yes, China's demand will start putting oil prices to soar because oil is a limited resource and therefore her rise is both being discouraged and being looked after as a deterrent for future happiness for other strong countries. Every country has their own right to compete and make business in the global market and be more demanding of their own national interest and defense once they reach a platform from where they can demand equal treatment and respect. China too is going that way and it is making sure that it stays that way for a long, long time. With advantages like specialized production and gaining more out of exporting these cheap but well-made goods is making China competitive enough to fit her within the global market economic processes. But where does she stand now. By that I mean where can we situate China within this matrix of global labor division. With a population size that can keep labour cost as stable and low as possible and for some many years to come, it can goon supplying labor even to its neighbouring countries, which is becoming the impending threat. Hence its labor resource is both a matter of happiness and of concern. Happiness for business groups, but a matter of concern for the government, who cannot just take the interest of its commercial citizens and stake the interest of the proletariat classes who have the most to suffer from this new change in global market process. China specializes in Labour intensive manufacturing products that requires a lot of cheap labors and thus draw US AND Europe investment in that sector only. But this also has a flip side. It will require China to always keep its labor wage as statuesque as possible even on the face of a changing economy. Will that be possible Maybe yes, and maybe not. Everytime labour cost will rise the shift will promptly occur to lesser costly areas. But that may not be possible if the skilled labors are unique in their service and incase of China such cheap labor manufactured electronic goods maybe one of a kind in the market already. China's is affecting countries like Vietnam and Nicaragua, which is true but not very clear as to how much. This brings us to a very important conclusion about the future of China, which everybody is speculating about. China has become a leading example in the forces of Globalization. Politically as discussed it may not be a hailing example of a good state but with upcoming innovative forces from the business and economic sector especially technology and manufacturing electronics goods, China does have the latent potential to emerge as a strong contender in the worlds market and world politics in terms of economic growth. In fact China is already influencing the foreign policy of super powers like UK and US and this already is being shown through so many competitive companies already making China one of their major marketing capitals. Foreign investment is steady and quite reaping their success story in places like Beijing that with a new urban-scape looks like the near future that China can boast of, for all her emerging towns. China also has become a major participant in global issues like terrorism, World Bank, WTO, Human Rights (though still weak) and nuclear weapons. Politically it may still be exploited but with a strong economic backbone it can create a good start for its future stake into world politics and for emerging as a strong political leader in the world by its sheer growth and achievement in such a short time. Thus China adds to the future hope of resisting the US unilateral political stand in politics and introducing multilateralism. Foreign trade exchange between China and other countries may add as a threat but that is a false assumption or fear. Instead it has multiplied profits and has given further hope of FDI from even smaller enterprises thereby making the growth prospect seem not just changing only a small section of a society but affecting all sections of the Chinese sections equally. Cultural problems are also part of this economic movement as it has given rise to a new culture that is both transnational yet Chinese. Thus China's emergence is not without any effect in the international front and the global politics. China has become part of many global forums that she can use as her economic platform to raise any issue for further gains or to justify her economic liberty. Infact the variety of such economic platforms is rich and far wide. The Asia-Pacific Economic Cooperation (APEC) forum, many UN agencies, WTO, all help China manage its image as a strong contender in the global scenario. China did resist the various principles and rules of the global or more centrally placed western country's claim for a liberal international economic system. The war in Kosovo, called the NATO war in 1999, led security initiatives to be taken by China in ASEAN Regional Forum (ARF). China now aims at reducing the hegemonic relations the Asia-pacific countries share with US. Thus creating common interests may ultimately bring home the new hope of communist unproductivity to newer and better opportunity for China. Thus economic power is also about political status. The switch to market economy is characterized by a balanced assessment of the benefits that China can reap. The dual problem of advantages and disadvantages for China is not without the advantages that it can bring to sectors like the possibilities of evening out income disparities, smoothen out existing social stratifications between the different strata; bring agriculture and automobiles to the fore of future cutting-edge development. China's relationship between her contenders and how that affects her business, China's independent development as a emerging world power; and gaining more economic security for her future generation - that would be a good challenge to keep up to. Works Cited 1. Havely, Joe. 'Giant aspires to superpower status' Thursday, May 5, 2005, CNN.com http://www.cnn.com/2005/WORLD/asiapcf/04/29/eyeonchina.superpower/index.html 2. Oster, Shai "Illegal Power Plants, Coal Mines In China Pose Challenge for Beijing", December 27, 2006; Page A1, The Wall Street Journal". Read More