The Impact of Globalisation on China
...ve also claimed a larger share of the global market following China’s admittance to the World Trade Organisation at the 2001 Doha conference. Being a member of the WTO has given China much greater access to overseas markets and raised exports. The willingness of the Chinese government to welcome globalisation can also be seen in the steps taken to attract foreign investment. In 1980 an ‘open door’ policy was adopted which led to the establishment of special economic zones. These zones in southern China have lower tax rates, cheap labour and power, less strict regulations and give investors exemption from import duties, all of which are designed to attract foreign investment. In order to gain more foreign investment, China has also removed a lot of its protection. Tariffs have fallen from 32% in 1992 to 15% in 2000. As a result of this China has experienced enormous growth in foreign investment throughout the 1990’s. In 2004 investments made up 46% of China’s GDP and this is expected to increase as Beijing hosts the 2008 Olympics. As far as imports go, China chooses to import goods such as machinery, medical equipment, oil, iron and steel from it’s other Asian neighbours such as Taiwan, Japan and South Korea. Only 8% of China’s imports come from America. China still imports a lot less than they export which results in a consistent current account surplus. However, globalisation has meant that billions of dollars leave China every year as Chinese students choose to travel to America, England and Australia to study. Since the onset of globalisation in the 1980’s, China has gone from being a relatively poor country to the second largest economy in the world, behind the USA, and easily the world’s fastest growing economy. The onset of globalisation has allowed China to sell goods and services to a much larger market. A more market – orientated approach to the economy and China’s labour force of 760.8 million people means a huge amount of exports are produced annually and globalisation means these goods can be sold for maximum profit. China’s dominance in the world market can not be ignored, as the phrase ‘Made in China’ becomes more and more familiar, in 2004 alone China earned $US583.1 billion in exports. China’s gross national product (GNP) continues to rise dramatically from $US980.2 billion in 1999 to $US 1.36 trillion in 2004. China’s economy continues to grow at an increasing rate with a 7.2% growth in 1999 compared to a further 9.1% growth in 2004. Last year China made up one third of world’s economic growth. While this amazing growth means a greater income for China and a relative increase in living standards it also poses new threats for the Chinese economy. Adult literacy has improved, as has infant mortality rates and life expectancy, but disparities between economic classes continue to grow and many other factors in living standards such as education and access to hospitals fail to improve. Wealth is not being shared equally among the population with China experiencing regional inequality and a lack of economic development. Economists are also predicting that China’s growth is not sustainable and will eventually result in the collapse of the Chinese economy. In the move to embrace globalisation, China has made the most of every possible resource in order to produce as many exportable goods as possible. Around half of the labour force are employed in the agricultural industry however, high and rough terrain coupled with large arid areas mean only 10% of the land surface can be cultivated. This area is being overworked resulting in soil erosion, loss of arable land and a steady fall in the water table. The large number of factories operating in China’s urban and rural areas is also resulting in widespread air pollution. The continual degradation of the environment jeopardises the longevity of the agricultural industry. Should this industry continue to become unprofitable, China will be faced with the problem of finding new jobs for the millions of people employed in this industry. China already has an unemployment problem with some studies estimating that close to 20% of the population are unemployed. The majority of this is structural unemployment as the government fails to find jobs for those who lost public sector employment during the free market reforms. This unemployment has led to 16.6% of the population living on less than $US1 per day. This kind of poverty exists mostly in rural areas. Within urban areas and the Special Economic Zones there are higher incomes and growing job opportunities, and this is where most of China’s income goes. In rural and northern areas there are higher unemployment rates and much lower standards of living, which has led to political instability. When GNP is measured by purchasing power parity as a whole country, China stands out as the worlds second largest economy, however GNP per capita is a mere $US 5,600, which means China is still a fairly poor country. For the second largest economy in the world, the living standards in China are fairly low, as the public sector remains too inefficient to cater to the populations needs. State owned enterprises remain unproductive and remain afloat through government grants and loans from China’s central bank. Less than half of these state owned enterprises make profits, which barely offsets the losses recorded by the rest of the enterprises. One factor in the inefficiency of these enterprises is corruption within the bureaucracy, as managers at in their own best interests and not those of the public. Until China’s public sector undergoes reform, its living standards and economic development will fail to correspond with its economic growth. China’s legal system is in need of reform so that it complements a more market-orientated economy. Laws need to be developed to protect private property, investors and creditors as well as to protect the environment and eradicate government and bureaucracy corruption. Other infrastructure such as transport, communications, schools, ...