Comparison between Russia and China Economic Status - Essay Example

Globalization: China and Russia. Task: Table of Contents Introduction…………………………………………….........................................3 1.1 Rise of Russia in Global Market………………………………………………3 1.2 Rise of China in Global Market……………………………………………….4 2. Comparison between Russia and China Economic status…………………………4 2.1 Political influence……………………………………………………………….5 2.2 Contribution of the export products…………………………………………...6 2.3 GDP differences……………………………………………………………..….7 2.4 Industrial Sector………………………………………………………..………..9 2.5 Education Sector…………………………………………………………...….10 2.6 Population Diversity……………………………………………………………12 3. Conclusions………………………………………………………………………...13 4. Appendixes 4.1 Figure 1…………………………………………………………………………..6 4.2 Figure 2…………………………………………………………………………..8 4.3 Figure 3…………………………………………………………………………..9 5. References………………………………………………………………………….14 1. Introduction Business interactions take many forms, and these forms range from small scale business dealings to large scale business relations that transcend across various cultures. The pioneering forms of business were largely of the former kind, but the contemporary society is increasingly being defined by business interactions of the latter kind. With continued interactions and acculturation among communities, the need for globalization cannot be over-emphasized, and this forms the basis for evaluating communities and cultures that are best poised for taking over in the international business environment. In light of this, globalization refers to the progression towards unifying business interactions across the global platform as opposed to within a given country or organization’s locality. It is the framework upon which international business is structured, and is the direction that business transactions are taking in recent times. However, there are various conditions that define the international business environment, and as such, this affects the success rates of various nations in succeeding in the new global economy. To this end, a comparative evaluation between Russia and China can highlight their viability in the new global economy. As such, Russia stands a better chance of succeeding in the international business environment and being the future of the new global economy when analyzed against China. 1.1 Rise of Russia in Global Market For a start, Russia’s foray into the international platform started with its rich history as highlighted by its supremacy during the cold war. The cold war was a period of military and power tussle between the countries of the eastern and western blocks after the end of the 2nd World War (Bellacqua 2010, p. 99). The Western Bloc was largely represented by the United States while the Eastern Bloc was represented by Russia, then known as the USSR, and its allies. The cold war was largely psychological and never developed into a full-blown war. However, by being part of it, Russia gained a lot of exposure and experience in worldly relations and overall familiarity with international participation in matters of both national and international interest (Levin 2008, p. 154). As such, this gives it a much needed head start in being a globalization and international business powerhouse, as it has better experience in international relations. In order to succeed in globalization, international relations is of particularly significant importance as international business involved relations between nations and regions in such a manner that the relations can be easily maintained. 1.2 Rise of China in Global Market China, on the other hand, has burst into the global scene much recently. While this cannot be downplayed, it highlights the fact that the nation lacks the much needed experience. While China has a very deep and long history itself, the history does not traverse the world, and is just limited to the confines of the country and its inherent cultures (Naughton 2007, p. 165). This means that it lacks the knowledge and experience of worldly or international relations, which is very important in being a leader in the new global economy. China’s foray into the international atmosphere dates only to the recent past, starting from the early 90s onwards (Robinson 2012, p. 117). This is after the cold war was over, and shows that China missed a lot that is essential in understanding the intricate details of international relations. However, in the short period that China has been in the international atmosphere, it has grown in exceedingly high rate, and this can be attributed to its rapid industrialization. 1. Comparison between Russia and China Economic status 2.1 Political differences Despite the above head start that Russia has, there are certain elements of its political orientation that it needs to change in order that it becomes better poised for taking over the new global economy. As such, Russia’s disintegration from the initial USSR has resulted in various political conflicts that negatively affect its economy, thereby making it difficult for the country to succeed in the new global economy. While the USSR was made up of a couple of republics that worked together to make it a global powerhouse, present day Russia is made up of only a part of the initial Union (Robinson 2012, p. 176). Additionally, most of the remnants of the initial Union are not in good terms with Russia. This is particularly highlighted by the ongoing conflict in Ukraine. The conflict has resulted in sanctions which have weakened the Russian currency, and is one major source of economic troubles for the Russians. Moreover, the political troubles that disintegrated Russia led to a change in the overall governing mechanism, which means that the government is now less centralized than it initially was. This means that incorporating business or economically viable ideas is much more difficult than if the political atmosphere allowed for centralization. In comparison, China is largely not marred with political struggles and instability. In fact, this is one of the reasons behind China’s rapid rise in industrialization and success in the global economy. Moreover, China is largely centralized and political aspects have a strict line of hierarchy that has to be followed. This form of political idealization makes it much easier for China to make decisions and implement them in accordance with the requirements of globalization. From this evaluation, Russia has a lot to learn in terms of the strong political centralization in China, as this form of political system has facilitated the country’s rapid growth particularly in the new millennium when it became more established. Additionally, elements of political instability are virtually non-existent in China due to this centralized system (Yu & Huang 2013, p. 188). This means that conflicts such as the Ukrainian war in the case of Russia do not impede China’s growth. In light of this, Russia’s political factors have the potential to prevent it from being the leader in the new world economy, and they can change this fate by sorting out aspects of political instability that result in sanctions that subsequently inhibit economic growth. 2.2 Major export products Despite the above, Russia’s economy is buoyed by various products that are especially significant in the export sector. Its major produce is petroleum and oil products that account for more than 57% of its total exports. In fact, Russia’s petroleum industry is one of the largest all over the world, thereby making Russia the largest oil and natural gas producer in the world. More than 11% of the world’s oil comes direct from Russia, and the country produces millions of barrels in crude oil per day. Additionally, Russia has the largest reservoirs of oil and natural gas by far, in addition to having the largest yet-to-be-discovered oil and natural gas reserves. Figure 1: Oil prices in Russia from 1994-2008, produced from http://octane.nmt.edu/gotech/marketplace/prices.aspx This means that Russia’s energy production is bound to increase with time, and it still has a very strong chance of being strong in energy production for the coming years. In comparison, China possesses an estimated 10% or more of the world’s natural resources, which makes it the third largest after U.S. and Russia. Therefore, this gives Russia an edge over the availability and endowment with natural resources by highlighting that Russia is endowed with more natural resources than China. Additionally, the fact that more than half of Russia’s export is made up of oil and natural gas means that the world at large is exceedingly dependent on Russian energy exports. Europe is particularly dependent on Russia’s petroleum exports, with a large percentage of the 57% being exported to Europe alone. Moreover, Russia also produces iron and steel in large quantities, and this accounts for the second most significant export from the country. Although it is far less than petroleum, it also accounts for more than 3.5% of Russia’s exports, thereby being a significant aspect of the economy. While 3.5% may seem little in consideration of energy’s 57%, it is worth noting that this represents more than $20 billion, which is quite substantial. In comparison, oil’s 57% is more than $300 billion. While these are the top two exports, Russia is also involved in the production and exportation of machinery, copper, electronics, fertilizers, and even wood that accounts for quite a significant part of the economy. Therefore, the combination of all these products and product ranges integrate together to give Russia the well-deserved edge in becoming a leader in the new global economy. 2.3 GDP differences As a result of the products that Russia produces, it is currently ranked as the world’s 5th largest economy in terms of the GDP. This position places it at a point where it ranks among the world’s most significant economies, meaning that it has a chance of easily competing against the largest economies in the world. Figure 2: % of Global GDPs between China and Russia produced from Angus Maddson, 2011, p 367. On the other hand, China is placed second in the world’s largest economies by value of their GDPs. While this position is much better than Russia’s 5th place, China’s population works against it and makes the GDP per capita much less compared to Russia. In fact, China’s GDP per capita has always been behind that of Russia, despite China’s recent rapid growth into a formidable world force. With Russia’s relatively manageable population, it is able to spread its economic power among its people thereby facilitate the realization of its full potential. This cannot be said for China as it struggles to contain its ever expanding population. With such an unmanageable population, China will largely be unable to effectively take over the new world economy as its GDP will be high but will be weighed down by its equally high population. The overall result is that China may have a world leading economy in terms of GDP but the poorest standards of living courtesy of the large population. In light of this, Russia is in a better state to overcome China in the race for the new global economy as its population is commensurate with its GDP, making it a much more balance state. Figure 3: China’s investment from 1998 to 2010. However, its unemployment rates are still slightly higher than that of China at almost 6%, while China’s unemployment rates are at the 4% mark. This means that despite China’s large population, the massive industrialization and manufacturing supremacy is able to effectively take care of the population and keep the unemployment rates at below 5%. This easily reflects in the population below the poverty line, with China having only 6% of its citizens living below the poverty line as compared to Russia’s more than 10%. 2.4 Industrial Sector While Russia prides itself in having quite a variety of natural resources and unrivalled supremacy in energy, China’s economy is greatly hinged on the production, manufacturing and processing of virtually almost all the good used in the world. From home appliances, crafts, electronic equipment, construction and real estate, to even farm produce. In fact, China prides itself as the sole producer of more than half of the vegetables and farm produce consumed in the world. This position gives it an edge as it has identified a niche for itself in the world as the globally recognized state in terms of production and manufacturing of the products and commodities most important to the world. By many standards, eliminating the Chinese influence would most certainly lead to a restructuring of the way the world manufacturing and processing industries are run since China’s input is greatly monumental. However, it is worth noting that some of the produce from China largely remains in China and is rarely exported. This is particularly true for fruits and vegetables, which while account for a large portion of what China produces, remains in China and only small percentages are exported to the rest of the world. This means that while Russia exports most of its produce, China’s economy is such that it exports just as much as it consumes itself, such that the relationship between its exports and national consumption is tied at the 50-50 mark. In terms of the literacy rates, both China and Russia are well past the 90% mark, which means that they are relatively in a good state by most standards. However, Russia still gets an edge due to the population factor. China has a population of more than 1.3 billion, while Russia is still at the 143 million mark. As such, Russia’s population is much more easily manageable compared to that of China, meaning that elements such as literacy rates are easily improved in Russia than in China. Despite the fact that their literacy rates are almost at the same level, more than 5% of Russia’s population speak English, while the same can only be said for less than 0.5% of China’s population. In terms of numbers, China has more than 10 million of its citizens speaking English, but this is a far cry from its population that runs into the billions. On the other hand, Russia has more than 7.5 million of its citizens speaking English, which is quite commensurate in consideration of its population. From this perspective, Russia has a higher number of its citizens speaking English relative to its population, while China is still hindered by its extremely high population. 2.5 Education Sector Despite the above, Russia has still not embraced internationalization of the education sector, meaning that it is losing out on the benefits of a global approach to education. The technology and science environment needs corporation between states in order that findings can be shared and research can be expedited. Without embracing internationalization of the education system, it is much more difficult to realize any significant improvements in consideration of the other countries. This is the exact situation that Russia’s science and technology facet is in, their skepticism to internationalize their education system means that by contemporary standards, they are lacking behind as they cannot overtake other countries. This then goes on to reflect on their economy as the rate of growth is directly proportional to the rate of development, which is a function of the penetration of science and technology. Additionally, the lack of internationalization of the education system means that Russia’s education may not be at par with the requirements of the global standards. Their students and overall population may lack in the exposure that comes with a global approach to education. This means that the returns associated with investing in then education platform will be largely limited, and elements of science and technology such as innovation will be greatly inhibited by the conservative approach that defines Russia’s education and science and technology approach. Moreover, their approach will limit the modernization of the economy and inhibit diversification. This will have the long term effect of being a major constraint particularly in light of the fact that their economy is largely based on exports. On the other hand, China has greatly internationalized its education system and expanded its research and development approach to a global platform. This has resulted in a knowledge-based economy that is easily diversifiable as per the dynamics of the global economy. As such, the economy can adjust to the different aspects that it finds itself dealing with, meaning that it is much more designed for the global platform than the Russian system. This can be highlighted by the significantly large difference between China and Russia’s patent applications, number of researchers, and even overall research output. This results from China’s increased involvement in the global economy and overall embracing of globalization. Indeed, China is almost in every economic investment particularly in the developing world, and this always gives it an edge in terms of the exposure and overall good will that comes from the involvement in such activities. Additionally, while both countries suffer from emigration, Russia’s case is far worse than China’s as its emigrants rarely make it back to the country as it is seen as being limiting. On the other hand, China tries to leverage on its emigration by its large population in addition to offering incentives that effectively help in its own economic growth and development. Therefore, the internationalization difference that exists between China and Russia is what explains the relatively advanced international relations and strong institutionalization that exists in China. As such, this is one of the major areas that Russia needs to tackle and get in order for it to solidify its position as one of the most economically viable state in the new global economy. This can be done by restructuring the laws that govern its institutions so that it may allow for some flexibility for the globalization of the education system and overall internationalization of its research and development so that the science and technology platform can get a boost from other world interactions. 2.6 Population Diversity Additionally, both China and Russia have widely diverse cultures. However, Russia’s culture is far much better than that of China as it is easily relatable to other cultures of the world. As much as Russian culture is diverse, this does not make it extremely peculiar and outlandish as is the case with Chinese culture. This means that it is much easier to connect with Russian culture than it is to connect with Chinese culture. Moreover, China’s culture is only inherent and only the natives can connect with it with the same level of familiarity that a non-native can connect to Russian culture. Indeed, this has led to Russia being given the honors of hosting the 2014 Winter Olympics at Sochi that also incorporates the Winter Paralympics, in addition to the upcoming 2018 World Cup tournament. While China also hosted the 2008 Beijing Olympics, Russia’s successive hosting of both the winter and Paralympics and the upcoming World Cup give it an edge in terms of highlighting the superiority of its culture. Additionally, taking part in these events will open international business and globalization avenues that will subsequently put Russia at a much better position of succeeding in the new global economy when compared with China. 3. Conclusions In light of all the above, succeeding in the new global economy necessitates the fulfillment of various considerations ranging from natural resources, history of a nation, political aspects, and even natural resources and the structural framework of the education system. While the above evaluation tries to consider the strengths of both China and Russia in their race to succeed in the new global economy, it is relatively difficult to draw a conclusion as to which among the two is better as each has its own strengths and weaknesses. Nonetheless, Russia seems to be at a much better position of succeeding in the new global economy based on its rich cultural orientation and historical background. Additionally, its supremacy in the natural resources gives it the most significant edge, showing that indeed it is the best country to succeed in the new global economy. References. Levin, M. (2008). The Next Great Clash: China and Russia vs. the United States. California: Praeger Security International. Bellacqua, J. (2010). The Future of China-Russia Relations. Kentucky: University Press of Kentucky. Yu, M. & Huang, Y. (2013). China’s New Role in the World Economy. Massachusetts: Routledge. Robinson, N. (2012). The Political Economy of Russia. New York: Rowman & Littlefield Publishers. Naughton, B. (2007). The Chinese Economy: Transitions and Growth. Massachusetts: MIT Press. Read More