China’s Global Economic Impact
China offers an interesting picture of a political and business environment. Its economic presence heavily depends on manufacturing and its inexpensive labor resources. As a result, this dependence has led to over-investment and overcapacity in certain industry segments such as oil, steel and cement. Also, China’s socialist banking tactic has complicated an already intense economy. As a result, the country’s veracious economic growth has sent inflationary and deflationary impacts across the world by raising prices of the globally traded commodities like oil, cement, steel and other metals. China’s old growth model, driven by infrastructure investment and driven by cheap credit, has run out of steam.
China has made leaps and bounds in the economic landscape of the global economy. Changes in policies enabled private sector and global competition that were previously monitored by the government to pick up steam as new laws in place to increase the number of children household to one plus and lastly, Xi Jinping’s (the leader of China) announcement to support a more sustainable consumer driven expansion in China (Silverstein, 2013). China’s mission in the era of Jinping is to have a technology driven economy high in quality and productivity performance. Their goal is to be the number one Superpower.
It has taken time to reboot the ideology of the political system which has provided optimism for economic growth. According to Fox (2013) China’s goal is not be a revolutionary power, yet, a revisionist power. Revisionists want more for themselves, whereas, revolutionists want to overturn the government.
As of 2018, there are 120 Chinese corporations on the Fortune Global 500 list. As far as brand recognition, the number is very low. To sustain a competitive advantage product branding in this region is a high priority. Huawei established in 1987 made its 2019 100 Best Global Brands debut, at sixty-eight. Huawei is a basic research organization focusing mainly on technological innovations and solutions that is fully owned by its employees.
It has been an uphill road for China to overcome the stigma of its production quality. To address a poor reputation, several areas must be addressed: having a more culturally diverse organization would help their leaders understand global needs and open channels of communication; China must shift from low quality, low value to high quality, high value; lastly, China must address country related political issues including cyberespionage, xenophobia and increased tariffs.
Historically, China’s gross domestic product (GDP) has shifted from the public sector to the private sector. This has enabled joint ventures which facilitates a smoother transfer of global communication, technological knowledge and cultural acceptance which is needed for growth. Studies posit China’s growth is largely due to its labor force (Yueh, 2015). China has been a high growth economy for over thirty years reaping a double-digit growth (Mangus. 2018). Today, the rate has slowed down to about six percent in the next twenty years.
Issues facing China today according to Mangus (2018) are: China needs to improve its financial misbehavior over the last twenty years; China also seeks to be a more prominent player in the global monetary system; also, there is a significant aging population and middle-income trap.
Looking at China, we can suggest that economic conditions, economic policies and the economic systems are the significant external factors that constitutes the economic environment of a business. The economic conditions of a country for example, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets are very important determinants of business strategies. Because there is no universal strategy for all industries, only those strategies that are tailored to an industry and to the skills and assets of a firm succeed.
Discussion Questions:
1. What is an economic system? What are the basic problems of an economic system?
2. What are the features of a mixed economic system?
3. Explain the role of government in solving problems that arise from different economic systems.
4. Define privatization and trace the history of privatization.
5. Explain the different routes of privatization.
6. Give your arguments for and against privatization.
7. Why is China’s privatization different?
8. Bring out the nature and causes for globalization of business.
9. Explain the stages involved in the economic transition of globalization.
10. Evaluate the impact of globalization on China’s economy.
11. List the strategies used for globalizing a business.
12. Natural resources are the wealth of a country’s economy. Discuss China’s key resources.
13. Evaluate China’s government policies towards management of their natural resources.
14. Evaluate the impact of economic development on environmental issues.
