In the late 1970s China made perhaps its most significant strategic political manoeuvre of the 20th Century when it embarked on a series of economic reforms that embraced globalization (Bijian, 2005). Deng Xiaoping and other Chinese leaders believed that to further China’s development, participation in an open global economy would be crucial to its survival (Chow, 2002) During the three decades since these reforms China’s political and economic institutions have undergone a dramatic transition (Overholt, 2005 and Economy, 1998). China has shifted from the world’s greatest opponent of globalization into a committed member of a global economy and advocate of globalization (Overholt, 2005).
The pinnacle of this transformation and China’s economic growth was its admission into to the World Trade Organisation (WTO) on 11 December, 2001 (Allen et al, 2006 and Fishman, 2005). Consequently, China is now subjected to international trends and forces to a degree unprecedented since 1949 (Bijian, 2005 and Chow, 2004). In this essay I will analyse the effect that globalization has had on China’s political, economic, legal and technological institutions. Furthermore, I will also analyse whether China has been forced to change to pander to the international economic community or whether it has voluntarily instituted change for its own benefit and development.
However before analysing the effect that globalization has had on China it is important to understand what the term “globalisation” means. Globalisation became a buzz word in the 1990s because of its influence in creating a world in which geographic location became increasingly irrelevant (Immerfall 2006). In essence globalisation refers to the unrestricted flow of goods, capital, information, technology and people across national borders (Chow, 2005a).
Globalisation is, however, by no means a new phenomenon and China has been subjected to its effects for many centuries (Alford, 1999). In fact, the effects of globalisation in China go “as far back as the Han dynasty (206BC-220AD) when trade took place between the Han Chinese and neighbouring people in the North-west through the Silk Route” (Chow, 2004: 3). Despite this, in the Qing Dynasty and the early stages of the Chinese Communist Party’s rule, right up until Deng Xiaoping’s open door policy, China tried to close its doors and restrict the influence of globalisation (Street, 2000 and Chow 2004 and 2005a).
This was not the first time that China was forced to confront and implement a national strategy to either embrace or combat the effects of globalisation. In fact, as recently as the 1990s, China was confronted by this conundrum, namely: whether to continue its global economic expansion in the face of the Asian financial crisis or to once again close it doors and retreat inwards to protect itself from the economic fallout of a struggling region (Fishman, 2005 and Nolan, 2001). However, by carefully weighing the advantages and disadvantages of economic openness the Chinese government decided to open up the Chinese economy even more, and eventually joined the World Trade Organization by implementing large economic reforms (Bijian, 2005).
There is no doubting that these economic reforms and China’s embracement of globalisation has brought stunning results. Since starting to open up and reform its economy in 1978, China “has averaged 9.4 percent annual GDP growth, one of the highest growth rates in the world” (Bijian, 2005: 3). One of the reasons for the huge leaps in growth has come from direct foreign investment that has been facilitated by China’s admission to the WTO.
For example, in the space of a few days in 2004, a North Korean Steel Company launched a $500 million steel project in the Dalian development zone; France’s St Gobain invested $70 million in one of its existing glass production lines in China; Germany’s Siemens opened its fortieth office in China for development of software; and Finland’s Stora Enso invested $1.6 billion in a paper pulp project in Guandong Province (Hall et al, 2004). Such results have seen China become the third largest trading country in the world and the envy of many developing economies around the world (Chow, 2005b).
While such economic statistics are regularly celebrated by the Chinese government as a success of China’s inclusion into the WTO, many in China are in fact lamenting the negative effects of globalisation and the scrutiny that WTO membership has brought. In fact WTO membership came at a very high price for the domestic Chinese economy (Overholt, 2005). Throughout the 80s and 90s China initiated structural changes such as the phasing out of direct subsidies for exports and began cutting tariffs in preparation for inclusion into the WTO (Pearson, 2001). Over the three years from 1994 to 1997, the country’s average tariff rate was lowered from about 43 to 17 per cent and at the time of China’s entry into the WTO in late 2001, the overall average was just 15 per cent. Such drastic economic changes were at the behest of the WTO and the result being that a lot of factories and domestic industries have gone bankrupt because many people prefer foreign products which have become cheaper as a result of China’s inclusion into WTO (Solinger, 2005).
Furthermore, Moore (2002) also argues that China’s accession into the World Trade Organization could be viewed as more beneficial to the rest of the world rather than China itself. WTO commitments made by China do not in any way protect China’s “domestic producers” and therefore the argument that that the greatest benefit of China’s WTO membership is enjoyed by foreign companies is indeed a valid one (Moore, 2002: 311). Yang (2004: 307) argues that admission into the WTO was in fact too big of a restructure step for China and continues by noting that Chinese involvement in the WTO is great for foreign companies and bad for local ones because “one of the first laws enacted” to ensure WTO membership “was designed to attract and protect investment from overseas”.
It is clear that this lack of protectionism, although beneficial to the outside world, has been disrupted the income to domestic businesses. Of particular note is the fact that with China’s WTO membership foreign investors have been allowed access to markets that were previously restricted or highly regulated (Samuelson, 2004 and Pearson, 2001). These incursions have been most evident in the insurance, telecommunications, and financial industries (Prasad, 2004). Such competition is however of great benefit to the domestic Chinese consumer. In fact, fifteen years ago China barely had any mobile telecommunication services, whereas now it claims more than 300 million mobile phone subscribers, more than any other nation (Bijian, 2005). Whether this is a result of modernisation or globalisation is highly debatable, but it is clear that Chinese consumers are embracing the increase in products and services provided by many foreign companies.
Other than the local businesses being hurt by foreign investments and industries, the labour market in China is also suffering from major unemployment as a result of the forces of globalisation (Chow, 2004). While entry into the WTO has in itself not created joblessness, it has however heightened a number of trends that were already underway, including accelerating the rate of insolvency of state owned enterprises. The result being the discharge of tens of millions of workers who, when they were younger, were once assured of employment by the socialist state (Economy, 1998 and Chow 2004 and 2005b). According to Prasad (2004: 6) “the unemployment problem is in fact likely to worsen over the next few years due to restructuring in the rural and state enterprise sectors”, the very type of restructuring that has been mandated upon China by the World Trade Organisation.
Another cause of the unemployment problem currently facing the Chinese economy is its shift away from sunset industries such as manufacturing, mining and construction to newer industries that demand workers with specialised skills (Prasad, 2004; Solinger 2005 and Yang 2004). Similar changes are evident in China’s effort to upgrade its technology industry, which has not only involved the replacement of much unskilled labour but in many cases also reduces the need to employ as many skilled blue-collar workers (Nolan, 2001 and Economy, 1998). While this can not be directly liked to WTO membership it is clear that the forces of globalisation are having a major impact on the Chinese economy, the products it produces and its labour force.
The amazing growth in China’s economy as a result of its increased participation and integration in a global economy is also having social and political consequences. Most notable a growing divide between China’s rich and poor. Obviously China would not have self imposed such drastic economic changes purely to encourage direct foreign investment to the detriment of domestic businesses, but it is clear the benefits of the global marketplace are not being shared around China’s 1.3 billion people (Solinger, 2005 and Chow, 2004). It is very much the case in China that the rich are getting richer and the poor are just getting left behind.
This is also evident in the growing regional inequalities in China. Despite the governments attempts to rectify the situation, foreign investment has continued to flow to those provinces where education levels are the highest, infrastructure most well developed and political power most concentrated (Overholt, 2005 and Economy, 1998). Moreover, while the wealthier provinces in theory pay taxes to the centre to compensate the poorer provinces, in practice this system has failed allowing corruption to flourish, resulting in power becoming de-centralised from Beijing to local authorities. Not surprisingly such inequality has contributed to serious political tension between the haves and have nots (Bijian 2005 and Economy 1998).
Overholt (2005: 7) however argues that despite the growing divide between the rich and poor, the Chinese “overwhelmingly support further globalisation”. Overholt (2005: 7) asserts that “no large country in human history has ever experienced such rapid improvements in living standards and working conditions” as China has in its acceptance of adjustments to accommodate the forces of globalisation. So while the economic dividends of China’s rapid growth are not being shared equally around the country, the majority are nonetheless better off.
One of the reasons for such widespread approval of the modernisation of the economy has been the upgrading of technology, especially telecommunications which has been an essential aspect of the Chinese government’s plans for continued economic growth (Chow, 2004 and 2005a and Econommy, 1998). Normally if there is general contentment among the population then this would provide little in the way of difficulties for those in power. Fred Tipson (1998: 12) however, notes a difficult conundrum for the Chinese government in their embracement of economic globalisation. “The Chinese leadership has repeatedly emphasized the central role of telecommunications and information technologies in building its modern economy…..on the one hand, actively promoting a modern communications infrastructure, while on the other hand, repeatedly trying to control the content and uses of the information that pulses through it.”
Tipson (1998) concludes that the communications revolution will “diminish the need or inclination of most Chinese to defer to central authority or accept routinely the government’s characterization of reality.”The Chinese government is more than aware of the threat to its power that the technological revolution and global scrutiny presents. Given the current uprisings and discontent in Tibet the government has blocked access to many websites to control the flow of information to not only its own people, but the international community (Maunder, 2008). So while the forces of globalisation may have brought prosperity to China, the Chinese government also has to work overtime to maintain its grip on power.
When evaluating the impact that globalisation has had on China it is important not to lose sight of the big picture. Economic growth alone does not provide a full picture of a country’s development and despite China’s population of 1.3 billion, its China’s economy is still just one-seventh the size of the United States’ (Bijian, 2005). However, the open-door policy that was first advanced by Deng Xiaoping in the late 1970s has been of great success in modernising China. It is true that such rapid growth has presented China with some problems, including the demise of some domestic industries, unemployment and minor political instability, however given its current path it appears that China’s rise to superpower status is inevitable.
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