The Influence of Globalization on China
Globalization processes are now happening all over the world. Their influence on the countries can be different. Globalization can contribute to the countries development, as well as cause some problems for them. In this paper, the influence of globalization on China will be investigated, and positive and negative consequences of globalization for China will be studied.
The History of Globalization in China
Globalization in China became intensive after the rapid adoption of economic and political reforms, in the period from 1992 to 2003, although globalization processes in China started even earlier. The protests at Tiananmen Square triggered those reforms, and they turned the country from socialistic direction to the intensive market orientation and globalization processes. The government focused on the privatization of collective enterprises and further movement to private firms. The number of special economic zones and foreign companies in China grew rapidly. The first step of reformation process in China was to introduce structural reforms to its internal economy. The second step was to further increase cooperation with global market. Finally, China joined WTO in 2001, which contributed to further reforms. According to WTO accession terms, China was required to eliminate all import quotas by 2006 and to reduce tariffs as well as to be open to further imports. Foreign companies and investors received a lot of expanded rights: for example, they could own up to 50 percent of foreign-owned enterprises in telecom and insurance industries, although their involvement in other spheres was restricted. There were also other trade rules that China should follow, including the expansive WTO national treatment clause, according to which foreign investors should be provided with the same conditions and treatment as domestic businesses (Wen 9). Thus, globalization processes contributed greatly to the economic changes in China, but their impact had a lot of negative sides (Wen 8-9). The positive and negative consequences of globalization for China will be studied further in this paper.
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Consequences of Globalization
The main positive consequence of globalization for China was its rapid economic development and growth. China was among the Asian Tigers, countries where economic growth was especially intensive. Thus, GDP of China grew rapidly after the implementation of main economic reforms in 1990s. In 1992, GDP of China was $ 425 billion. In 1995, it was already $732 billion, and in 2000, it reached the index of $1,205 billion (Trading Economics). The growth of GDP continued rapidly even after the global financial crisis, and in 2014, GDP of China was already $10,355 billion (Trading Economics). Thus, globalization was very positive for Chinese economy, and it helped it to continue developing even in crisis times. One more economic benefit was the growth of employment in industry. It happened because many foreign companies that were attracted by cheap labor opened their facilities in China and offered new jobs. For example, in 1995, about 21% of all Chinese employees were employed in industry; in year 2000, this share was already more than 22%, and in 2011 above 29% (Trading Economics). Finally, as a benefit to economy, exports of China increased, and globalization contributed to that much. In January 1991, Chinese exports were $40 billion; in January 1996 they constituted $92 billion, and in January 2000 their index increased to $168 billion (Trading Economics). Currently, in April 2016, total exports of China already reached $1,728 billion (Trading Economics).
One more positive impact of globalization on China was the growing number of MNCs in the country. MNCs were attracted to China by positive economic conditions and cheap labor force that enabled them to shift production facilities to that country. MNCs brought economic and technological growth to China as they opened their locations in the country and provided jobs to Chinese employees, as well as a large assortment of goods in the markets. Imports and exports of China increased due to the development of MNCs, too. For example, in 2006, total sales of MNCs locations operating in China were $2.9 billion (5.8% of total global sales), and in 2011, they reached $6.1 billion (10.9% of global sales), growing by 110% (GCIS). Thus, not only the number of MNCs in China grew, but also their contribution to the global production. As a result, growing number of MNCs led to the economic development, which was analyzed above.
Globalization also led to the technological development of China. Growing cooperation with Western and Japanese companies allowed Chinese researchers and companies to use modern technologies and innovations that were not implemented in China before the globalization. It is possible to evaluate technological development of China with the help of some figures and facts. R&D spending as a percentage of GDP in China grew from 0.7% in 1991 to 1.8% in 2010. The share of engineers in the labor force was higher in China than in the US. In 2010, there were 2.4 million engineers in China out of S/E labor force of 3.2 million (75%). Nearly 44% of college students in China majored in S/E, in comparison with 16% in the US (Wu). The average citation count of Chinese papers grew from 8.4 in the period of 1990-1994 to 10.7 in 2000-2004 (Wu).
As it was mentioned above, the globalization in China was mostly a result of successful reforms of 1990s-2000s. However, not all consequences of the reforms and globalization were positive for China. Different benefits, such as tax advantages, were provided to private and foreign companies operating in China, but they were not available to the sate-owned companies in China. Even with such benefits, foreign firms tended to continue hiding profits and thus taxes. For instance, Nike subsidiary in Suzhou had revenues of about $85 million in 2001, but it reported a loss during several years. From 51% to 55% of foreign companies in China showed losses in 2003 (Wen 9). According to Chinese Industrial Census of 1995, state owned enterprises and collectively owned firms paid two or even three times higher taxes than foreign companies that operate in China. Moreover, SOEs and collective firms usually provided education, health care, and other benefits to their employees, but private firms were not required to do that. Thus, such behavior of foreign organizations had negative impact on the national economy and national firms, which were not in equal conditions with the foreign ones (Wen 9). Another important problem brought by globalization was the violations of employees rights. International companies provided jobs for Chinese employees, but the working conditions were not always proper. MNCs try to use the benefits of cheap labor force in China. Thus, they often violate laws. For example, many companies adopted extended working days, law salaries or even child labor. For example, it was exposed that 11 factories that made Apple products employed children in 2013 (Garside). Thus, negative consequences of the globalization in China influenced mostly domestic enterprises and employees.
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In conclusion, the globalization is a general process in the modern world, and all countries are influenced by this trend. China is among the countries that have been much globalized. The process of globalization was extremely intensive in 1990s-2000s, when the government adopted new policies that contributed to this process. The consequences of globalization in China had both positive and negative sides. They had positive impact on the economic growth and development, as well as on the technological development. However, there were some negative consequences of globalization for domestic firms and employees, whose rights were violated by MNCs.