Globalizing in China

Introduction

Globalization is said to be the phenomenon that brings people and countries of the world together on a common platform. It is the process by which the geographical wideness of the world is negated by the world being one in contact and communication. This process is stimulated by trade, industry and business relations between the people of the world. Globalization process is mostly aided by the advent of fast and easy means of transport and communication across the world. Information technology is also a major driver of globalization. The contact and incorporation among the people, businesses and nations have resulted in integration of practices and the development of new cultures.

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There have been vast effects of the politics of various countries because world politics always have an impact on local policies and principles of any nation (Lechner, 2009). Economic development and cultures have not escaped the effects of the world’s transformation into a global village. Globalization has in many occasions been used to bring a perception related to the term “economic growth” in cases where they are seen to be of a positive implication; therefore, in this context, the two terms have often been used interchangeably. Globalization is also sometimes perceived to be that which causes economic growth. This is why it is hard to bring a situation of disjoint between the two. There have been diverse opinions and reactions towards the subject of globalization. Those who are supporters of globalization propose that this is the solution to the predicaments that face poor third world countries. They argue that adapting to cultures and policies that propelled others to prosperity will bring improved economic improvements to developing countries. Those who hold the divergent view that does not support globalization suggest that market liberalization and free interactions between the world economies is oppressive to the poor nations. The proposition of the critics of globalization is that it uses the disadvantaged nations only to propel the economies of super powers to greater heights (Lechner, 2009). This paper aims to discuss why globalizing in China is a step in the right direction. It brings out the reasons that back up why investing in China is a step in the right direction and also places a counter argument. The paper then brings out the synthesis statement with recommendations of the measures the Chinese government should take to promote Foreign Direct Investment.

Globalization in China

China’s story of globalization provides a case theory that globalization is the secret for poor nations making it to the developed country status. It also presents a case against the proponents of the common belief that globalization is the answer to the economic woes of the world’s weak economies. Many believe that the integration of China into international trade and adoption of market liberalization policies is what thrust China into an economic boom. There is also a proposition that the credit behind China’s huge economic growth goes to the fact that the Asian country has over time instituted measures to protect itself from the perils that comes with market liberalization and opening its economy too much to the extent of predisposing itself to exploitation by western economies (Wu, 2006).

Chinas’s economy saw tremendous developments from the wake of the 1980s to 2008. With a growth rate estimated to stand at 8.3 percent, the country saw major positive returns, which among others included the multiplying of the income of the Chinese populace by a figure touted to be a double within periods of a century. The economy went up, while poverty levels dwindled.

Why globalizing careers in China is a step in the right direction

Globalizing careers in China, especially for foreign investors, is highly lucrative given the incentives given by the Chinese Government. To remain at pace with globalization, China established Special Economic Zones (SEZs) that were basically the country’s interface point with the rest of the world. These are zones where exports are processed and are the only places where foreign investors are free to set up shop (Wu, 2006). The zones have special privileges when it comes to importing raw materials for industrial use without inviting state duty. The infrastructure here is more advanced and the economic rules and policies that are in use are exceptionally different from the rest of China. The SEZs allow investments that are based on imports and exports to thrive, while at the same time protecting local government enterprises. China focuses on high-productivity goods. This is not the expectation many have of an upcoming economy that has a lot of labor at its disposal. The exports of China are reflective of a country that has tripled in its per-capita-income. These are enough reasons to attract a foreigner to invest in the country.

The SEZs create a chance for China’s industrial sector to evolve. These foreign investors set up multi-million investments in the zones that are highly productive and employ new technology in operations (Wu, 2006). The foreign inputs to China prove to be instrumental in stimulating the economic growth of the country. The SEZs are credited for the huge success China has had economically. As such, China is a rich ground for investments and tapping the best in new technology. The aim of China creating these zones of high technical infrastructure was to increase development and capabilities of domestic corporations. The policies were instituted to ensure that technology from outside was transferred to promote the local enterprises. Previously, the government heavily relied on state run enterprises to drive the economy, but later on gradually opened up to allow partnership with the private sector. Industrial clusters began to come up when the state started to be a bit liberal and allowed provinces to develop their own financial and economic policy. Many of these early policies would have run afoul of WTO rules that ban export subsidies and prohibit discrimination in favor of domestic firms—if China had been a member of the organization. Chinese policy makers were not constrained by any external rules in their conduct of trade and industrial policies, and could act freely to promote industrialization (Wu, 2006). This history of China’s economic development has favored the country’s economy, thus making it a favorable destination to set up business and thrive in one’s career.

China just opened up its markets at around 2001 and became liberalized in preparation to join the World Trade Organization. When China was seeking World Trade Organization membership, its industries had already developed and no longer needed shielding from the implications of the international market. As such, China already has an established base for thriving in the industrial sector owing to its former closed up market. To qualify for WTO membership, the country had to bring down the tariff rates to internationally acceptable levels. China also had to abolish some of its policies that were not in line with international trade. This notwithstanding, China did not leave the forces of the global market to fully dictate the direction of its economy (Wu, 2006). To mitigate these effects that were deemed to be counterproductive, the country engaged in an exchange rate policy that was competitive to mitigate the negative effects of globalization. The country regulated the appreciation of its currency to ensure that that it did not rise up too much, which would have made its products expensive, therefore reducing exports and consequently slowing economic growth. In the wake of inflation around the globe, the Chinese Yuan remains relatively stable, thus it is an incentive towards foreign investors wanting to set up base in the country. This is enough reason to attract one to globalize his career in China.

From the economic history of China, the country has been poised to be the next world bigwig and is headed towards becoming a world superpower. If China’s economy continues to grow, and all parameters suggest so, it might as well replace the United States as the world’s biggest economic powerhouse (Li, 2005). No smart investor would want to miss the opportunity of investing in an economy that is leading the pack. The consumers in China, who are of the lower and upper income bracket, have high purchasing power to be spent on buying both necessities and luxury goods in comparison to many other countries in the world. In addition, the country has a low debt ratio; therefore, its economy is very vibrant. The circulation of money as a result of the frequent spending of these citizens ensures that the economy thrives. Basing decisions on this factor, it would be a wise decision to invest in China because it has a very stable state of economic affairs. With an ever growing economy, China is the most ideal place to invest in the present times (Li, 2005).

The knowledge on which investment to put resources and capital in is the best strategy towards achieving business success. China provides a great pool of this important information because of its advancement in information technology and the elaborate education system that delivers qualified expertise. Education is a much respected and highly regarded culture in China. Therefore, the information that is available for business in China is more than that which an investor would find anywhere else in the world. The country has enough money that ensures that the economy is ever thriving and, therefore, investors are assured of the safety of their investments from economic shortcomings like inflation (Li, 2005). As a matter of fact, inflation is unheard of in present day China. Most of the Chinese economy is urbanized and, therefore, this is a very convenient breeding ground for business and investment. The fact that a large percentage is urbanized translates to rates of employment that are high, which translates to the people having disposable incomes that are large enough to afford them the luxury of heavy spending. This money circulates at a very high rate and investors find this as an economic haven.

China has even beaten the United States of America in terms of attracting foreign investment because the US is plagued by high unemployment rates that lead to less spending. The world’s investors have directed their attention to Asia’s gem, China, which is promising to give them higher returns (Li, 2005). For sure, globalizing one’s career in China is a step in the right direction.

China pulls its finances for investment from America’s economy, which might be viewed as a shortfall. This, however, does not mean that the thriving of the Chinese economy will not continue to have benefits in the overall world economy. The implications of investors putting up in China will also ultimately have effects on the economies of other countries. It is a worthwhile consideration for investors to make that in the long term, the key to driving the global economy is investing in China. The economy of China is robust and stable; therefore, investors are bound to get immediate benefits from its economy (Li, 2005).

Why globalizing careers in China is not a step in the right direction

Investors have been shunning the Chinese stocks market as an investment hub of late because of the uncertainty that exists in the state of the economy. Skeptical views suggest that the economy may be bound for a flattening out, or even a dive (Wolf, 2003). Many feel that China needs economic policy restructuring to bring back investor confidence of the stock investors. The prices for many Chinese stocks have not been gaining reasonable ground, and this is causing an exodus from its stock markets. For some years now, the growth rate of the country’s Gross Domestic Product has had a dramatic decline. Analyzing the growth in industry output, it is safe to say that the fast growth that had been observed through the years is not as vibrant as before. The reduction in energy output and real estate development has elicited worrying reactions, and there is concern that the economy of China might be headed for a crisis (Wolf, 2003).

China depends on Europe and the US as a destination for its exports. With the recent crisis in the European economy and the unpromising economy of the US, China may face negative changes in its export earnings. There is a worry that the evolution of the Chinese economic policies may, for the first time in history, work against them. Analysts believe that the exports in China will be affected by these developments in the world. The fact that most of the enterprises in China are run by the state means that they may not necessarily be oriented on profit making (Wolf, 2003). As a result, most state-run enterprises in China may present unfair competition for the foreign private investors. Over time, China will need to move towards a more market based economy if it is going to unleash the forces of innovation and productivity to truly join the capitalist world. But this does not mean that a collapse is imminent or even unavoidable in the middle term. The challenges that China will face in future require investors to brace themselves for tough times as the country struggles to implement market liberalization, while at the same time trying to hold on to interventionist policies (Wolf, 2003).

For the longest time, China has enacted policies and laws that have inclined towards favouring state corporations while providing little incentives for growth in the private sector, and this has proved detrimental to attracting Foreign Direct Investment. Entrepreneurs find it as an inconvenience to work in an environment that has too many rules and restrictions because this will mean that the bottlenecks and bureaucracies present will waste time and reduce their profits.

Complying with the trade restrictions in China is not an ideal operating environment for foreign investors. The process of setting up a manufacturing plant in China is a good example of the challenges that are faced by investors. First of all the legal requirements are many and strict because the economic framework of China is primarily designed to favour the local government based industries. There are also restrictions on the location one is allowed to set up the facility as evident in the Special Export Zones policy. These zones may be suitable for business, but the cost implications are very high (Fuming, 2002).

Another rule that is found to be repulsive for investors venturing into the Chinese economy is the compulsory joint venture with government corporations where investors are required to offload part of their shares to the government in order to be licensed to operate in China. The judiciary also tends to favour the local Chinese citizens in cases where they are entangled in lawsuits by the foreign investors. Albeit this, the fact that these locals may be in the wrong conducting what is termed as unfair business practices. All these contribute in making China an unfavourable destination for foreign investors (Fuming, 2002).

Adopting new policies will improve Foreign Direct Investment in China

Providing natural resources to foreign investors will stimulate the influx of foreign investors into China. This can be in the form of allowing mining and exploration activities by foreign multinationals in the country and leasing land for those seeking to invest in the agriculture sector (Balasubramanyam & Wei, 2005). The provision of low labor has also been seen to encourage high investor interest. Setting a minimum wage at lower rates would set an incentive for investment in labor intensive ventures. It is also of importance to improve the levels of education to produce highly skilled workers. This would be interesting to investors because they are assured of skilled labor. Setting the proper environment for low risks by ensuring that the political and legal environment does not have high risks is also an investment incentive. In addition, the government of China should do more to encourage mergers that will involve FDI. Allowing foreigners to participate in acquisition of state run corporations that are not doing well will also increase the volumes of foreign direct investment (FDI) (Balasubramanyam, & Wei 2005).

The presence of stability in the economy together with a stable state of political affairs will greatly influence the flow of FDI. Stability has paramount meaning to entrepreneurs because the state of political and economic affairs determines whether a business will have a life in that country. Political instability means the presence of widespread violence and revolutions by citizens or even in worse cases, rebels. This presents unfavourable grounds for conducting business and many investors will flee. Instability in the economy will lead to presence of unfavourable factors like inflation, which will diminish meaningful returns and profits from investments (Haak, & Hilpert 2003).

It is important that markets run an open policy if foreign direct investments are to be attracted into the country. A liberalized market means that a business can derive maximum benefits out of the investment because there are no restricting rules and policies. If the Chinese government liberalizes its markets and does away with stringent tariffs which are disincentives for FDI, a lot of investors will stream in to start up business in the country. Providing tax holidays for big investors who bring in better infrastructure and technology will encourage world multinationals to invest in the Chinese economy. Tax holiday policy will ensure that the investors enjoy high profits and at the same time the economy will benefit from improved infrastructure and innovative technology (Haak & Hilpert, 2003).

Conclusion

Globalization is defined as the harmonization of the different economies of the world into a homogeneous phenomenon. The globalization in China has gone through a lot of transformation. China had a closed economy with a communist run economy, but with the increase in pressure and persuasion from the rest of the world, it had to liberalize its economy to keep up with the rest of the world. There are many reasons why investors should invest in China, the primary reason being the availability of new technology and incentives for business. However, the skepticism over the fate of the economy in the near future is a cause of worry for many investors. China should increase incentives to investors by providing favorable low risk environments for investment.