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ThenegativeeffectontheChineseeconomycausedbyeconomicglobalization

By Clarence Boyd,2014-05-15 20:17
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ThenegativeeffectontheChineseeconomycausedbyeconomicglobalization

1.Introduction

    1.1 Aim

    This report investigates the negative effect on social, economic and cultural approach of China influenced by economic globalization. The purpose of this report is to encourage to The Economic Development and Reform Commission of China to minimize the negative effects on China.

    1.2Background

    Generally, economic globalization is a phenomenon which is not new, ‘the last major wave of globalization occurred in the early 1900s up until World War I’ (Liber8 2007). It promotes integration of the world ‘through trade, financial flow and knowledge’, specifically, ‘it means that factors of production are used on a world scale’ (Free World Academy n.d.). Economic globalization trend cannot be avoided so China joined in the World Trade Organization (WTO) in 2001. Negative effects on the economy and the environment in China have been caused by economic globalization. Wang (2011) maintains that after China joined in the World Trade Organization (WTO) in 2001, ‘China is becoming one of the hottest destinations for foreign direct investment (FDI)’. With multinational corporations occupying much of the market in China, the local small and medium enterprises which are not strong and less of funds were bankrupt. This situation may lead to China losing its economic security. Index Mundi (2011) reports that the unemployment rate increased from 3.1% to 4.1% between 2000 and 2010. It caused unemployed people to get poorer and the gap between poor and rich becomes larger and larger. As a consequence, the society may experience unrest. In the area of the environment, Ma Jun, director of the institute claims that in China some of the multinational corporations are not

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    models for environmental anymore, they are slackening their efforts in China (cited in Sun 2007). As a result, it accelerates the quality of the environment to decrease. These are both problems for China which will become more serious in the future. Consequently, these negative effects on China will put China’s development in question. 1.3Scope

    The negative effects on globalization in China will be examined from 2000 to 2011.

    1.4Methodology

    This report will show the statistics of the negative effects on economic globalization in China. The report includes various academic resources from the internet, material from many experts and the WDI Database and Academic Search Complete Database and Business Source Complete Databases. 1.5 Plan

    After a detailed explanation of the negative effects on the economy and the environment in China caused by economic globalization, a conclusion will be given and followed by relevant recommendations.

2.Findings and Discussion

    2.1 Causes

     2.1.1 Too much multinational corporations’ market share in China

    Figure 1: Utilization of Foreign Investment in China from 2001 to 2010

     Unit: US$100

    million

    Source: adapted from the Foreign Investment Department of the Ministry of Commerce from 2001 to 2010.

    Ma (2010, p.35) notes that ‘China faces comprehensive security challenges in the age of globalization’. After China joined in WTO in 2011, China’s foreign direct investment (FDI) increased significantly. The line chart above shows that China’s foreign direct investment (FDI) experienced a sharp increase from about US$ 488.24 to US$ 1008.21 between 2001 and 2010. Therefore, there are a lot of multinational corporations set up in China such as P&G, KFC, and Nokia. With a large number of multinational corporations’ sprang up in China, a problem appeared. Multinational corporations take too much market of China, for example, the shampoo people use in daily lives. Li Shulin, a marketing expert maintains that ‘Procter & Gamble Co (P&G) has a 55 percent market share in terms of hair-care products in China’ (cited in Yu 2011). As a consequence, multinational corporations take up the majority of toiletries market in China. In addition, in the market of Smart phone. The pie chart below illustrates the China’s mobile phone market share in Q1, 2008. 32.5% of mobile phone market share was Nokia; it was the largest vendor in market share in China. As a result, the Chinese enterprises just share a little market so the enterprises which

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    without large amount of funds and competition will bankrupt quickly, then the multinational corporations will dominate the whole market in China and it is harmful for Chinese economy security.

    Figure 2: Mobile phone market share in Q1, 2008

    Source: adapt from Grail Research China Mobile Phone Survey among Campus Students, 2008.

     2.22 The unemployment rate climbs

    Overholt (2005) notes that economic globalization lead to China experienced a painful adjustment. China’s manufacturing jobs decreased from over 54 million to fewer than 30 million during 1994 to 2005 because of the great competition bring by the economic globalization. Siddique (n.d, p231) notes that ‘globalization leads to increase in inequality, that is, it widens the gap between the rich and the poor’. People who are unemployed may let them get poorer and this situation accelerates the gap between the poor and rich becomes larger and larger in China and this may lead to social instability. The line graph below demonstrates the unemployment rate climbs in China from 2001 to 2009. It

    suffers from 3.6 % to 4.3%. As a consequent, it makes more people getting poorer and poorer. It is reported that the gap between richest and poorest people in China is arriving at a serious level (The New York Times 2005). In addition, The New York Times (cited in Official Xinhua News Agency 2005) reports that ‘the most affluent one-fifth of China's population earn 50 percent of total income, with the bottom one-fifth taking home only 4.7 percent’. Lai (2010, p.828) claims that ‘in 2006, in a nationwide public opinion survey, income inequalities were regarded as the third most serious social problem’. As a result,

    the wealth gap becomes wider and it may lead to society unrest even cause the war.

    Figure 3: The unemployment rate climbs.

    Source: adapt from WDI and GDF Database, World Bank, 2010

     2.23 Multinational corporations accelerate the contamination of the environment.

    Gray (2008) asserts that globalization is one of reasons for the environmental

    pollution. It is an effective way to accelerate environmental pollution. Developing countries have a weak awareness on environmental protection and much looser environmental protection laws and a larger number of cheap labor forces so “big industry prefers to move its facilities to such ‘pollution havens’ rather than work in more regulated markets”. For instance, Nolan (2010, p.70) claims that ‘China was16 of the world's 20 most polluted cities’. With the deepening of economic globalization in China more and more multinational corporations come in and set up their factories. However, some of the multinational corporations in China are contaminating the environment. The table below illustrates some multinational companies in China release environmental information for exceeding discharge standards. It shows that all of these multinational corporations discharged over the applicable standard in China, it is harmful for the environment. As a consequence, some of the multinational corporations are accelerating Chinese environmental pollution getting worse and worse.

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Figure 4: Multinational companies in China release environmental information

    for exceeding discharge standards.

    NamePollution facts

    Royal Dutch ShellExcessive release of polluted wastewater

    Samsung Excessive release of pollutant: CODElectronics

    Nestle Excessive release of pollutant: CODLGExcessive release of production wastewater Kraft FoodExcessive pollutant: COD, BOD MotorolaExcessive release of pollutant: CODDensoExcessive release of pollutant: CODBridgestoneExcessive release of sewageSource: adapt from Green Peace, 2009.3.Conclusion

    The negative effects on China caused by economic globalization are more and more obvious. Nowadays, China is suffering from the pain caused by economic globalization.

    It is concluded that there are three main causes for these negative effects on China. First of all, multinational corporations are occupying too much market share in China leads to China loses economic security. Furthermore, the unemployment rate climbs leads to the gap between poor and rich becomes larger and larger and this situation may cause society unrest even the war. Moreover, multinational corporations contaminate the environment. They accelerate Chinese environmental pollution problems.

    In light of these negative effects, the following recommendations are proposed for The Economic Development and Reform Commission of China.

    4.Recommendations

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4.1 Enhance Chinese enterprises’ market share.

    As mentioned in the findings and discussion section, multinational corporations occupy too much market share in China and this situation will lead to China loses its economic security. Therefore, it is recommended that The Economic Development and Reform Commission of China enhance local enterprises’ market share.

    4.1.1 Integrate small and medium enterprises.

    The local large enterprises which have enough funds and scale should integrate these small enterprises which were not strong enough and lack of funds in order to enhance the competition for building more market share. After that, the local enterprises will have more competitiveness to compete with the multinational corporations to grab more market share in China. 4.1.2 Introduce high-technology and the scientific management.

    Use high-technology and the scientific management to run a business. It

    will improve productive, increase profits and get more market share. 4.1.3 Introduce a law

    Set up a business law to protect the multinational corporations dominate the whole market in China. Therefore, China can ensure the economic security.

    4.2 Eliminate the gap between rich and poor.

    The findings of this report reveal that unemployment rate climbs and people will become poorer and poorer after that the gap between rich and poor becomes larger and larger. This situation will lead Chinese society unrest.

    4.2.1 Create more jobs.

It is recommended that he Economic Development and Reform

    Commission of China should develop the tertiary industry in order to create more jobs for those who are not employed at present. This measure will protect them become poorer and poorer. Then, for those who are still unemployed the government should give them support. In addition, enhance the lowest income standard and improve the standard of personal income tax.

    4.2.2 Adjust social redistribution.

    The government should adjust social redistribution put more money on the

    poor people and levy more tax on the rich people. As a result, the gap

    between rich and poor will disappear step by step and after that the society will stay peaceful.

    4.3 Introduce a strict environment protection law.

    In the finding and discussion section, as mentioned those multinational corporations accelerate the environment pollution in China. It is recommended that Economic Development and Reform Commission of China to introduce a new strict environmental law to protect environment. In addition, supervise the multinational corporations to run their businesses environmental friendly and improve the standard that multinational corporations to enter China. Just allow those companies who can obey the Chinese basic environmental laws. Reject those who will build high polluted industry in China. Therefore, the multinational corporations who accelerate the environment pollution in China will not exist anymore.

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References

    Free World Academy n.d., Economic Globalization, Free World Academy,

    retrieved 12 November 2011,

    

    Grail Research 2009, Mobile phones in China, Grail Research 2009, retrieved 13

    November 2011,

    Gray, I 2011, Causes of Pollution, Tropical Rainforest Animals, retrieved 20 November 2011, pollution.html>

    Green Peace 2009, An investigation into corporate environmental information disclosure in China, Green Peace, retrieved 29 November 2011,

    report.pdf>

    Index Mundi 2011, China Unemployment rate, Index Mundi, retrieval 12

    November 2011, < http://www.indexmundi.com/china/unemployment_rate.html>Invest in China n.d., FDI Statistics, Ministry of Commerce P.R.China, retrieved 13 November 2011,

    <http://www.fdi.gov.cn/pub/FDI_EN/Statistics/FDIStatistics/default.htm>Lai, HY 2010, ‘Uneven opening of China’s society, economy, and politics: pro-growth authoritarian governance and protests in China’, Contemporary China,

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