China and the World: Economy and Security - Term Paper Example

China and the world: Economy and Security Contents Introduction 3 Reasons for rise in the Chinese Economy 3 United s Role in the Chinese Growth Situation 5 Impacts of China’s Growth and Development on the Asian Landscape-The Security Standpoint 6 Conclusion 8 References 10 Introduction In one of the recent developments pertaining to the global trade and economic sector, the region of China has dramatically risen to be one of the largest economies of the world while promoting the growth of the private sector. A historical outlook based over two decades reflects that the average gross domestic product for China stood at around 8 percent. Recent estimates made during 2004 show that Chinese economy ranked sixth in respect to the global economy. One of the major reasons for China’s growth in the world economy is the rise in the flow of foreign direct income into the region. Further, the opening up of the world economy helped China to increase the exporting and importing activities at an annual average growth rate of 15 percent. Chinese governance over the global economy is reflected by its fast expansion in trade activities with regard to the global trade functions. Further, the incorporation of China in the World Trade Organization has further helped the region to increase its trading activities through changes made in the regulatory mechanisms. However, the rise of China in the global economy raises huge concerns for security owing to apprehensions over the growth of disputes in the realm of trade. Rise in trade disputes are observed to lend major impact on the economic and fiscal situation over the region. (Prasad, 5-7). Reasons for rise in the Chinese Economy The economic decision taken by the ruling political party Communist Party of China to privatise a large number of industries which were under the state governance is considered to be one of the fundamental leaps promoting economic success for the region. The growth in privatisation helped the industries to mitigate the legal and administrative restrictions involved. Further, the growth of the concept of market economy also helped the industries to expand their business sphere in the international level. In fact, the development of the Chinese economy through acts of privatisation and economic liberalisation helped the Chinese government to gain control over seemingly disadvantageous regions of the world. Political leaders like Deng Xiaoping were prominent activists who promoted the cause of privatisation in several industries located in major Chinese provinces. (Woo 1, 8, and 14). The change in the investment patterns in the Chinese economy also contributed to the growth of the region with respect to other global areas. Investment patterns within the country countered changes both because of the increased involvement of Deng Xiaoping and the growing influence of the World Trade Organization on the economic affairs of the country. Economy of China was characterized by the growth of fixed investments in many sectors with varying levels of economic consumption in the domestic and national sector. Deng Xiaoping’s government stressed on the practices of introducing policy measures to reduce the impact of inflation and thereby to promote the growth of the Chinese economy in terms of gross domestic product. Further, the Chinese government also focused on making the region function based on the policy of market mechanism which helped the growth of private sector. Along with the growth in market economy during 1992, the Chinese economy was further strengthened with its increasing contribution to exports which gained impetus from 2001 after gaining membership in the World Trade Organization. The Chinese economy from the period after 2001 also reflected decline in the consumption patterns both in the domestic and government sectors which helped in steering the economic growth brought about by economic policies of the government. However, with the emergence of the recessionary environment, the Chinese economy countered a steep decline in the export activities and thereby a huge dependence on the rise in the investment was rendered by the government. This set a temporary imbalance for the Chinese economy for which the growth of the economy focused more on increasing the contribution of domestic activities in augmenting the economic situation of the country. (Zhu and Kotz, 11-12, 14-15, 22-23). United States Role in the Chinese Growth Situation United States of America rendered a huge impact in helping the economies of China and Asia to gain dominance in the world order. The government of America continued to reflect its dominance over the Asian landscape through its cooperation activities rendered in the category of finance and other related resources. United States also acted to promote considerable security to the economic regions of Asia to help the nations fulfil their economic and social objectives. Further, the region of United States also acts as a potential market for the products produced by the Chinese and Asian regions to help the economies grow, in turn depending on large amount of exports. (Sutter, 10-11). The growing involvement of United States in promoting economic development in the Chinese region can be observed to be in the growth of the flow of foreign direct investment. The period pertaining to 2004 and 2005 reflected huge flow in foreign direct investment into China from United States despite Chinese government’s action to reduce the dependence as such. During 2004, the amount of foreign direct investment rendered to China by United States was estimated to range to around $4 billion. The major industries which were targeted by the foreign direct investments ranged from manufacturing to service sector companies and also to promote the development of the information technology belt in the region. Further, countries like United States also endeavoured to promote the growth of contemporary industries pertaining to the retail and entertainment sector in the Chinese region with the gradual increase in the flow of foreign direct investment during 2005. In the current stage, the flow of foreign direct investment in China is being delivered to help in the growth of industries pertaining to research and development which would help in rendering economic and innovation growth in the region. (The US-China Business Council). Impacts of China’s Growth and Development on the Asian Landscape-The Security Standpoint The growth and development of the Chinese economy had profound impacts on the Asian region. In fact, the entry of China in the World Trade Organization rendered separate challenges and considerable amount of opportunities for the Asian region. China, through large scale invitation of foreign direct investment and being the major resource base for other countries, helps to draw huge amount of capital and economy in the Asian region. Further, China through large amount of dependence on open market mechanism also helps to draw the attention of large number of countries to conduct trade in the region. However the incidence of China’s membership in the World Trade Organisation is also held to render large amount of challenges owing to the growth of the regulatory regimes. China’s membership into the World Trade Organisation helped in further easing of trade barriers in the region which led to the growth of other nations to export their commodities in several industrial sectors belonging to the manufacturing and services sector. This rise of exports being made to the Chinese region would help in the enhancement of trading activities along the East Asian nations to different regions of China. Increase in trade activities thereby would also help the regional economies to make their economic position better. Again, the regional countries would be further enabled to regain supply from the Chinese regions easily to speed up the production processes. Membership of China in the World Trade Organisation has also helped China along with other South East Asian markets to rein the global market by producing cheap products of improved quality. The manufacturing organisations in these countries owing to the prevalence of surplus amount of labour and other resources have significantly gained competitive positions in the global trade landscape. Further, United States’ action on easing up the import quotas pertaining to products and services obtained from the Asian countries helped China in getting a formidable growth in the textile sector. The growth in the trade and economic potential of China rendered significant impacts both positive and negative which can be studied through analysis of several regions. Countries such as Indonesia gained huge growth in the export paradigm owing to rise in Chinese demand for products like rubber, palm and manufactured oil. Further Indonesian region also focuses on enhancing the export of both commercial and food products like cotton and sugar to the Chinese region. However, the Indonesian region is also observed to be largely affected by the loosening of quotas in the textile sector by developed economies like America and Canada while trading with China. With the growth of Chinese dominance on such sector, the apparel industries belonging to the Indonesian region are marked to counter a decline in the sale of their products. Same as Indonesia, the region of Malaysia is also observed to counter both positive and negative impacts owing to the entry of China in the World Trade Organisation. Malaysia is observed to counter an increase in the sales of commercial and food products like wood, oil seeds, commodities like raw cotton, and other livestock products. However, Malaysia like Indonesia also suffered greatly in the apparel sector owing to the rising dominance of China. With regard to Philippines, it is observed that the country will gain a lot of advantage with its ability to market large number of agricultural products to the Chinese region. Further, this country with its abundance of skilled human resources is also ready to counter a competition with the Chinese economy pertaining to the consumer products and electronic industries. Philippines which also aims to gain access to large amount of foreign direct investment like China focuses on expanding the electronic goods market to economies like United States. Thailand, like Philippines, also gains momentum in exporting large number of agricultural, commercial and other manufactured products to both the Chinese and other foreign economies. This country which counters competition in the apparel sector owing to Chinese dominance renders increased focus on the quality enhancement of electronic and other consumer durable commodities to gain a larger market. Countries like Cambodia, though would gain a larger share in the exports of commercial products like wood and rubber to China, is facing large amount of threats owing to its increased dependence on textile and apparel industries. The growth of China in the global textile market counters a negative effect on the Cambodian region countering the impacts of rise in unemployment, trade deficits, wage and salary reductions, industry closures and a host of other effects. An analysis made on the Vietnamese region signifies that China’s entry into the world trade body would help the country in augmenting the exports of both agricultural and commercial products. Side by side the country also focuses to augment the market for small manufactured and consumer durable products. Further Vietnam also focuses on the growth and intensification of both labour intensive and other industries like textile and apparel to better compete with China in the international trade sphere. (Ianchovichina, Suthiwart-Narueput and Zhao, 57-58, 61, 67-71, 74, 76-77). Thus, ascension of China to the global trade body along with actions of other developed nations to ease up the quota regulations renders both positive and negative impacts over several regional nations. Thus, separate security mechanisms are needed to be formulated by these nations to effectively compete with China in the international trade sphere. Conclusion China from the bygone period is continually endeavouring to rise up to the economic sphere through events like open market mechanism and change the governmental policies, in turn bringing about growth in the private sector. Rise of China in the trade and economic activities is further enhanced owing to its ascension to global trade bodies like World Trade Organization. In fact, the growth of China along the stated lines has helped the country in bringing about economic prosperity for other regional countries along the Asian landscape. These countries have been able to take the advantage of open market economy through expansion of their trade activities pertaining to products belonging to commercial, food and manufacturing categories in both China and other regions. However, China’s dominance in the global textile and garments trade significantly affects the position of other regional countries which must be taken control of. References Prasad, Eswar. China’s Growth and Integration into the World Economy: Prospects and Challenges. International Monetary Fund. [Pdf]. 2004. April 11, 2011 . Woo, T. Wing. The Real Reason for China’s Growth. The China Journal. 41. pp.115-137. [Pdf]. January, 1999. April 11, 2011< http://www.econ.ucdavis.edu/faculty/woo/realreasons.pdf>. Zhu, Andong and David, M. Kotz. The Dependence of Chinas Economic Growth on Exports and Investment. [Pdf]. July, 2010. April 11, 2011 . Sutter, G. Robert. China’s Growing International Role. [Online]. (No date). April 11, 2011 . The US-China Business Council. Foreign Investment in China. [Online]. March 14, 2005. April 11, 2011 < http://www.uschina.org/statistics/2005foreigninvestment.html>. Ianchovichina, Elena, Suthiwart-Narueput, Sethaput and Min Zhao. Regional Impact of China’s WTO Accession. [Online]. No date. April 11, 2011 < http://siteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1206974166266/4833916-1206974192224/Chapter2EastAsiaIntegrates.pdf>. Read More