Impact Of Globalisation On Emerging Market Economies

Impact Of Globalisation On Emerging Market Economies The concept of globalisation is a phenomenon that has been spoken about all over the world. As described in essay one, globalisation is the increase in the interconnectedness of the different countries of the world, economically, socially, politically and technologically to resemble a village, largely facilitated by the increase in information and communication technology. Again as mentioned in essay one, Globalisation is not a new phenomenon, for centurys individuals and later companies, institutions and corporations have been trading with each other in locations that are tremendously far from their point of origin. The Asians for example used the monsoon winds that occurred after a space of six months to move from their countries and reach Africa to trade i.e. buy and sell products to the Africans. China and Europe were also connected during the middle ages through the famed Silk Road across Central Asia. This allowed the two parties to invest to one another which are an aspect of globalisation. This depicts the fact that for a long time globalisation was in existence but not recognised as today as globalisation (Jagdish, 2004). Globalisation attempts to depict the steps by which the networks in the world in terms of communication, transportation and trading cause the linking (integration) of the regional economies, societies, cultures, as well as technologies. At this point in time most of the world is considering the aspect of economic globalisation as one of the single most significant aspect of globalisation. With this in mind economic globalisation has been separately defined as the linking of economies of different nations to create an international economy via trade, FDIs, Investment cash flows, and the disperse of technology. Globalisation is usually recognised as being driven by the union of the economic, technological, socio-cultural, political, environmental and biological factors. The effect of globalisation have widely been reported which have been viewed as positive and negative. Different countries have viewed globalisation differently. To some countries such as the less developed countries (LDCs) they view it as a means of destroying the indigenous culture and the imposition of the western cultures such as the way of dressing, the way of talking, the mode of economic activity undertakings, the social events etc. while other nations view it as a means of modernizing and providing civil cultures to the uncivilized, it is introducing new technology for the betterment of the countries that lack technology, the creation of new opportunities ion terms of businesses etc. An interest however has evolved on to why this phenomenon is now widely embraced by the emerging economies and to what extent are these economies benefiting and not loosing from this phenomenon. This essay will focus on critically assessing the impact of globalisation on a specific emerging economy which is China. The aspects that will be focused upon include the analysis of the issues discussed in essay one. Which include: The rise of globalisation in China, the impacts of globalization socially, economically, environmentally and technologically on China and finally make a conclusion and recommendations. 2.0 The rise of globalisation in China The term globalisation did not enter into the Chinese official system till the 1996, nevertheless, the leaders had already acknowledged the aspect way before that date. Some references to globalisation appeared in academic writings in the early 1990s, but the dominant concepts in scholarly and policymaking circles were interdependence, integration, and internationalisation. The first time that globalisation entered into one of Chinas biggest city Beijing, the officials thought of it as a trend which is being propagated or driven by the advancements in the scientific and technological world which had lead to the increased cross national movement of investment income, goods and services, and the movement of the so called knowledge i.e. know how. At first there was an emphasis on simply the aspect of technological drivers to globalization hence restricting globalisation to the economic realm in the official Chinese analyses. However, the term was later understood that it included social , cultural, political and even security dimensions. The Chinese put early attentions on the opportunity for economic development and overlooked the concerns of the US hegemony, issue of westernisation, national sovereignty and other controversial issues in the political realm. Long before the 1990s when globalisation became a known world phenomenon, the Chinese participation to the world economy was undeniably increasing. When Deng Xiaoping officially took power in the year 1978, the cross border flow of investment cash flows, goods and services, information and technology had increased tremendously. This was further accelerated in the 1990s. By the mid of the 1990s the economic ties of China with the rest of the world seemed critical to the robust economic growth that made China the envy of industrialising countries everywhere. For example, by 1992 China stood as the worlds leading recipient of foreign direct investment (FDI) among developing countries. Indeed, FDI accounted for sizable (and growing) percentages of Chinas domestic investment, industrial output, exports, tax revenues, and job growth before globalisation became a catchphrase. A series of events in the late 1990s tested Chinas initial, somewhat romantic, notions of globalisation quickly and severely (Croucher, 2004). 2.1 Reasons for China going global China decided to globalise as it has learnt from her past history that isolation has made her to backwardness. However, in order to achieve durable economic growth and prosperity in todays world of rapid change in technology and dynamic business environment, the right way is to integrate with the worlds economies through trade liberalisation which in turn might enable her to increase sales, acquisition of resources and minimise risks. China has changed itself from being the worlds greatest opponent of globalisation, and greatest disrupter of the global facilitators into a committed member of those facilitators and advocate of globalisation. Currently, China has decided to transform itself from a closed economy (communist with a strictly trade barriers) to a more open (liberalised) economy than other Asian countries in particular Japan. However, the acceptances of using some of the foreign rules and laws, the use of foreign languages like English in their institutions as well as education and commitment to global competition are not just modernising Chinese institutions but altering Chinese civilisation. The economic successes of China are indeed associated with trade liberalisation, corporation and other key aspects of globalisation (Overholt HW, 2005). Contrary to the early fears, Chinas economic growth has stimulated majority of her neighbours trade and even foreign investment rather than frightening them. Indeed, the recent growth of China has enabled Japan to revitalise its economy and even saved her neighbours from global economic downturn and become recession proof. The success of China has become one of the remarkable things among the most important and leading economies in the modern history. However, its economy faces the world history of the most severe combination of banking, urbanisation as well as employment challenges, on which by 2020 a demographic squeeze will have possibly few workers supporting many dependents (Overholt HW, 2005). 3.0 Impact of globalisation on emerging economies the case of China Globalisation has brought tremendously positive and negative impacts on the national economy. Though it has raised competition as well as interdependence among economies in the global market in particular emerging market economies, it also enables emerging and developing economies to contribute in the growth of the global GDP, the following figure from IMF estimates, illustrates as estimated from the year 2005 up to 2010. Soucce:http://www.dwc-emergingmarkets.com. However, there are many effects that globalisation has had on developing and emerging countries such as China. Some of the effects have been viewed as positive and others as negative. Below is an analysis of the effects of globalisation that were described in essay one which is specific to the Chinese country. The aspects that will be focused on therefore include the economical, social, environmental, political and technological impacts of globalisation on China. Economic impact As discussed earlier, economists have linked a lot of global events to globalisation and integration. Globalisation in terms of economics is the process of increasing integration among different countries, resulting into the establishment of a single world market. Globalisation encourages foreign trade, reduction or removal of trade barriers, therefore economic growth and development http://www.bukisa.com and (Croucher, 2004). The aspect of the economy that has been impacted by globalisation in China include; the issues of trade, finances, investments etc. 3.1.1 Trade As mentioned in the previous sentence above, globalisation has an effect on trade. Globalisation encourages trans-national trading which eventually leads to economic growth. China has benefited from this tremendously. For the past 30 years Chinas export level has increased by 17% a year. The Chinas international trade levels have also increased dramatically due to globalisation. In the mid 2000s, China was accepted in the world trade organisation (WTO) in response to the trend in globalisation and the reduction in the trade barriers, the opening-up to foreign investments (in particular manufacturing) as well as international trade. This enabled the country as a whole to enjoy the globalisation benefits because it provides opportunities if exploited and sustained will eventually contribute in the countrys economic growth through international trade and foreign investments in both direct and portfolios. Moreover, China has witnessed a significant growth for the past ten years in tradin g with other nations around the global as a result of trade liberalisation and the process of globalisation. There has been a tremendous increase in the investment flow due to globalisation. The diagram below shows the trend of Chinas trade which means export, import, and trade balance. The data from National Bureau of Statistics of China in the year 2006 illustrates that the export trade exceeds import trade. Source; http://www.japanfocus.org/_Ming_WAN/2576. According to Croucher (2004), the data show that from the year 2001 to 2007 then Chinese has had an increase in the growth of economics at an average of 8.5% per year. All material and non-material indicators show a rise in income, life expectancy and standard of living. Also there has been an increase in overall education level and overall reduction in poverty. 3.1.2 Finance When looking at the aspect of finances, one can view before and after globalisation in China. Before, the united republic of China had loosened the policies it had on foreign affairs; it had a banking system that was very inefficient, a system that was very weak in terms of its structure. Globalisation has improved this aspect in a way that is unimaginable because it has provided a fierce competition to the rest of the world. In globalisation era, in order for the financial institutions like banks to match with the rapid change in technology as well as unpredictable business environment, these financial institutions in particular banks must be more creative and innovative in improving its standards to match with the standards of the world economy in order to attract and protect foreign investors. Because of this, the banks of the united republic of China have improved efficiency and competitiveness. (Croucher, 2004). 3.1.3 Income inequality The aspect of globalisation has introduced a more capitalist system in China where instead of communal ownership; the aspect of ownership has become more of individualistic nature. This being the case, there is no longer equal distribution of income among the people of China. This has benefited some of the members who believed that they deserve more for the more work they did, this has created a gap among the rich and the poor people that was not there in the past. However, the wealth obtain in this era of globalisation are still concentrated in few developed countries as well as few powerful individuals while leaving emerging economies with an empty hands even though are generated from them. 3.1.4 Investment Globalisation has increased trading in China as a result it increases the amount of overall income and therefore increase in the savings amount. This increase of savings actually caused the people to inject more and more money into their local banks. The injection of this money eventually increases the overall capital in the banks and the amount of money for investment in the Chinese economy. The issues of lending has now moved to a whole new level, companies from one country ask for loans from banks in a different country as well as banks of one country can now put branches in other counties which automatically affects the economies. Governments of one nation go and obtain loans from other nations. A typical and yet most amazing scenario is the fact that the American government being in millions of debt to China which is an emerging economy. (Croucher, 2004). As mentioned in essay one, the economy of a nation relies a lot on the business environment that exists. Whether there is high domestic trading or there is a wider range of investments from international companies. Globalisation has enabled the economies of different countries become integrated. The GDP of China has benefited a lot as a result of globalisation. As mentioned earlier Chinas GDP has been growing at a rate of 10%, one of the fastest growing rates in the world. No doubt globalisation has increased the foreign direct investments in different nations. At this point in time the Mc Donalds company of the United States of America had made a record entry to Chinese economy when the policies of these countries had allowed room for the free market economy. The impact of globalisation on Chinas economic growth is far-reaching. During the past 20 years, Chinas international trade expanded 16 times, with its ranking in the world to seventh place from the original position of 32nd. Trade dependence rate lifted from 10 to 36%. In terms of the amount of FDI, China is now the largest economy amongst emerging economies as regarded as the faster growing economy supported by its favourable business environments, which favour foreign investors as they can achieve location economies as well as cheap skilled labour to work in their manufacturing companies. According to a modular study on the synergy of FDI conducted by the Development Research Centre of the State Council, Chinas GDP recorded an average annual growth rate of 9.7% over the past 20 years, of which 2.7% was attributed to FDI. (Owens 2008). Though Chinas GDP has shown a smooth growth and an increase in FDI, but different wage standards for Chinese and other emerging economies where skil led people in technology sector for example become discrimination as they are less paid while the same level in the same professional are highly paid in developed countries compared to them. Socio-cultural Impact Another notable impact of globalisation has been on the culture of the Chinese people. The simplest way of defining culture is by acknowledging that it is the way of living of people in a certain community. This also means that it is the way in which people of a certain population and ultimately country tends to carry out their daily activities. Globalisation has been in the aspect of spreading multiculturalism due to availability of more opportunities to settle in far countries. People of various cultural heritages are attracted to live and study the economic heartbeat on the global. These people go with their cultures in these places and this result into multicultural societies: However, there is a real danger of these diverse cultures to disappear because of assimilation in these new societies and spread of pop culture. There have been different effects of globalisation on the cultures of different societies including both negative and positive. Below is the brief explanation on t he positive and negative impacts of globalization on the Chinese culture. The Chinese culture has been affected by globalisation. One of the things that can be considered to be positive effects is the introduction of the social networking in the country. Due to globalisation people of China are now able to use the face book, twitter, my space etc which allow them to interact with the outside world through technology. Good things that are being practiced in other cultures are easily adopted by China people. Globalisation has been seen as a catalyst for change in the cultures by the imposition of the pop culture (western culture). For example the way in which people talk, act, dress etc has changed over the last few decades. The type of music that people listen to globally has changed; even the morals of certain societies have changed. The issues of education, different interests on social events etc are now exposed to the Chinese people who previously have been guarded in their own culture. Furthermore, there are now different beliefs such as Christianity, Islam which have been introduced to China that was initially blocked by the communist country. Their negative impact has included the issue of increased exposure to indecent culture. For example issues move from simple as people wearing revealing clothes such as mini skirts, skin jeans, and watching unethical video which are very dangerous to children. For example pornography has now eluded most of the cultures of different people including those in China. It is completely true that many people are forgoing their heritage for the new living styles which are believed to be more modernised. Now people believe that if you speak your native language and do not know how to speak English, then you are not really educated. All these are a result of globalization. The way in which people communicate has now also changed. People have conversations via the phone and have reduced the more traditional way of communication which was to visit and see each other physically. No longer are people playing sports outside, they rather play video games, watch movies in the house, all these are a result of globalization. Furthermore there is a change in the type of ownership in the emerging economies. Other effects include the fact that now access to television grew from a lower percentage of the urban population (1991) to more than 75% of the urban population (1999). Cable television and foreign movies became widely available for the first time and have acted as a catalyst in bulldozing the cultural boundaries. All these technologies have changed perceptions and dreams of ordinary people. Unmarried boys and girls are sharing same apartment and staying away from their parents. Scientific and technological innovations have made life quite comfortable, fast and enjoyable. There is more availability of cheap and filthy material (CDs or DVDs of Hollywood movies, porn movies, sex toys, foreign channels like MTV) in the name of liberalisation. Few years back, in China and even in other developing and communist countries, basic phones or land-line was a prestige symbol but now possibility of finding people riding a bicycle while holding a mobile phone (cellular phone) in hand listening to music using ear phones, internet browsing, talking or even clicking cameras of their phones is a normal issue. In reality, globalisation has highly affected the dot-com generation or society than the earlier generation known as conservative. The introduction of cable network has increased exposure and imitation of foreign cultures such as western where youth have build a culture of celebrating different occasions like birthdays, valentine days but to the contrary, these celebrations has increased the number of friendship between girls and boys whose end-up to sexual relationship and hence result into sexual transmitted diseases. The aspect of globalisation has introduced a more capitalist system in many nations that were primarily involved in communal ownership; the aspect of ownership has become more of individualistic nature. There is no longer the culture of equal distribution of income among the people of china. Environmental Impact The environment has been effected by globalisation in a very unique way. Globalisation presents a mixed blessing for the environment. It creates new opportunities for cooperation but also gives rise to new issues and tensions. For example, liberalised trade may generate economic growth, which in turn, may translate into increased pollution, including trans-boundary spillovers of harm (super externalities) and unsustainable consumption of natural resources (Dua and Esty 1997). Likewise, economic integration strengthens competitive pressures across national borders that may help consumers by lowering prices, improving service, and increasing choice (Bhagwati 1993, 2000). But these same pressures constrain national government capacities to regulate and necessitate intergovernmental coordination of domestic policies as well as cooperation in the management of the global commons. Without effective international-scale governance, globalisation may intensify environmental harms wherever reg ulatory structures are inadequate (Nordstrom and Vaughan 1999). As mentioned earlier the environment basically refers to every thing that surrounds us. In the globalised world more and more business opportunities have emerged for the different businesses in the world as a consequence of the businesses that are engaged in manufacturing and involve in the emission of harmful substances that have increased and eventually have caused destruction in the ozone layer in different parts of the world. The Chinese is highly affected because of being a centre for manufacturing companies from developed countries such as USA that source cheap resources like raw materials and labour. This is one of the causes or ways that led China to become very environmental destructive as it has been industrialising using harmful substances as source of energy. This has caused the LDCs people to suffer from diseases like cancer etc. There has been also an aspect of selling less efficient or low quality products to LDCs hence China in one way or another is continuing dumping harmful products to LDCs who cannot be able to pay for the highly quality products. The Chinese companies are selling their products to developing countries like Tanzania which are harmful at reduced costs, but in reality, many of their products are imitated and also being of low quality, however, they do this as a way of dumping their waste products since the majority of customers from developing countries can not afford to buy the same products of better quality exported to developed countries. On the other hand, through globalisation there are now campaigns all over the world that relate to environmental protection. International treaties e.g. the Kyoto Protocols, debates and policies on environmental friendly productions have been signed and made by different nations. The reduction in green house emission treaties have been signed by many nations in the world and this has tremendously affected China because China is one of the largest polluters in the world. (Owens 2008). Technological The Chinese are now the ones who imitate all the existing technologies anywhere in the globe, as they reveal that they can copy everything except your mother (Daniels et al 2009). The arena of globalisation has made the latest technologies to exist in every part of the world. Ranging from the latest mobile phones, laptops, video games and all other gadgets, globalisation in one way or the other has ensured that no one is left behind. Globalisation has lead to the increase in the spread of technology all over the world and China has capitalised on this. China is now becoming the largest provider of cheap products that resemble the modern technology in the African market. Every product that is produced or sold in the developed countries, the Chinese produces them and sells them at cheaper prices in the less developed countries. At this point in time, practically all parts of the world are aware of the existing technologies every where. The technology that is used in Europe is also used in China and at times even found in Africa. Globalisation has enabled the world to create, modify different technological devices that were founded by someone else in the different part of the global. (Owens 2008). Political-legal Globalisation has impacted on the issue of political and legal environment. As described in essay one, globalisation has been at the centre acting as intermediary or facilitator in the increased international laws that are in existence, the existence on the global organisations that provide principles across the world. The United Nations (UN) has had a significant part in the way in which it wanted the politics of the Chinese people to be put. Some have seen that the presences of globalisation in the affairs in China are causing the Country to lose its sovereignty. The latter is because China is always being scrutinised by the international countries. For example all countries are now looking at the policies of China and try to challenge some of the things that it is doing. The issues of communism, the issue of not allowing the foreign religions, the issue of suppressing capitalism are all being challenged by the world bodies in relation to China. (Croucher, 2004). 4.0 Conclusion and Recommendations Globalisation is an ever increasing phenomenon that is not passing-by but staying. Globalisation is inevitable especially in todays competitive business environment where customers and fierce competition force businesses to go global. Through reform and opening-up (trade liberalisation) over the past 20 years in the Chinese environment, it has been evident that China has accumulated valuable experiences as well as sound material strengths. Today China is in the best position to face the global competition as a result of globalisation; the emerging economy like China has seen super exponential growth which is the benefit of properly assessing the global environment today. There are many detrimental aspects of globalisation in many countries but the benefits are far reaching. With the concerted efforts of the Chinese people, the strategic goal of building a well-off society in an all-round way will be achieved. By learning swimming through practice, China will master the art of riding the tide of globalisation and in the process we will surely achieve the rejuvenation of the Chinese nation. Knowing the fact that the issue of the benefits depends on the country and the context that the benefits are viewed from, then China has been good in assessing this situation and now becoming one of the largest beneficiaries from globalisation. The issues that are related to the loss of a countrys freedom and sovereignty that play a key part on whether to embrace or reject globalisation, nevertheless, globalisation will happen. In a brief overview though one can see that there are many economically related benefits that have been associated with China being part of globalisation with an annual 10% growth in the gross domestic product. Again economically China has expanding sales as a result of diversification to other markets globally as a means of widening their markets; this has enabled them to build their customers base. The Chinese now have the African market which is highly being targeted by the western nations. The increase in the market is because of the acceptance of globalisation and its conditions. At the moment, China has transformed itself from the worlds greatest opponent of globalisation, and greatest disrupter of the global institutions created, into a committed member of those institutions and advocate of globalisation. It is now a far more open economy than Japan and it is globalising its institutions to a degree not seen in a big country since Meiji Japan. Adoption of the rule of law, of commitment to competition, of widespread use of English, of foreign education, and of many foreign laws and institutions are not just updating Chinese institutions but transforming Chinese civilisation. All of Chinas economic successes are associated with liberalisation and globalisation as well as other aspect of globalisation that has brought China further successes. Never in the world history have so many workers improved their standards of living so rapidly. China has effectively become an ally of U.S. and Southeast Asian promotion of free trade and investment than it is acceptable to Japan, India and Brazil. Globalisation has also influenced the establishment of Chinas national and cultural identity. Although cultural globalisation might easily blur the cultural identity of an individual national culture, it could also bring about something positive. It has actually brought people of the Third World with both positive and negative effects: If we face the challenge in a critical way and make full use of the opportunities to develop the national culture in a broad international context, this will most probably highlight the Chinese national and cultural identity and make the essence of Chinese culture and literature known to the world. All in all the above was the discussion of the impact of globalisation on China.