Implications of Chinas Emergence as a World Factory - Essay Example

I. Introduction The moment China opened up globally in the recent decades it was originally portended for being a massive market for billions of consumers, appealing to the global retailers and producers. While the domestic market of China is undoubtedly significant and will continue to be so, China has turned out to be recognized primarily as a major site to produce goods to be sold all over the world. China became a pivotal region at the advent of the 21st century which basically resembles England in the 19th century. Furthermore, China continues improving and progressing in economic terms. China was perceived as merely a low-cost location to produce essential, labour-intensive products. At present, China is competitive in several sophisticated technologies and is contesting the exporting competencies of many other surfacing markets all over the world, not to include highly industrialized nations such as the United States and Japan. Just take into account the fact that China manufactures more than half of the world’s cameras, almost half of the televisions and air conditioners, above 20% of washing machines, and nearly 20% of refrigerators and the fact is the list keeps going (Nolan & Fureng 2003: 58). What is more, there are technologically superior manufacturing techniques for which China is judged better than the United States. With the entry of China into the World Trade Organization in 2001, the competition only steps up. Other countries have consented to lessen security of apparel as well as textile goods, in so doing reinforcing one of the great leverages of China (Nolan & Fureng 2003). Hence China is equipped to become a progressively more influential and powerful force in world production. Furthermore, China has consented to open its market to different kinds of goods and services. The outcome will be efficiency-improving rivalry for the rapidly increasing private sector, sped up privatization of the lumbering state division, greater prospects for world suppliers to get to Chinese consumers, and grander opportunities for Chinese businesses to contend with global giants. II. Implications of China’s Emergence as the World Factory Before the current entry of China into the World Trade Organization (WTO), producers that are foreign-invested were demanded to generate a minimum of 70% of their production for the export market (Wolf et al. 2003, 110). Producers in China were allowed to import unprocessed materials and goods duty free if it was intended for re-export. However, foreign producers were simply daunted from manufacturing for the Chinese market. Hence, foreign traders in China either had to acquire substandard locally manufactured products or import pricey foreign signature goods. Under the policies of the WTO, this will transform. Foreign producers will be capable to manufacture for the Chinese market. They will be capable to transport to foreign vendors working in China. This transition could have the implication of intensifying imports of parts into China and trimming down the trade surplus of China. By now the substantial declines in tariffs and nontariff barriers in the last decade have resulted in to a massive boost in import of products intended at the local market or domestically focused producers. Furthermore, foreign producers will at present have an even grander enticement to manufacture in China as it will make available greater access to the promisingly money-spinning domestic market. With the entry of China into the WTO, the import tariffs of China will be trimmed down even more in the near future, in so doing enhancing the procuring capability of the domestic market. One prominent case in point is the automotive industry. From 1998 until the 2004, the import tariff on automobiles will have been diminished by 75%, hence establishing automobiles reasonably priced to the small but emerging middle class (Lo & Tian 2005, 83). This will not merely enrich the real procuring power of multitudes of Chinese, yet it will remarkably change their standard of living as well. Nevertheless, ownership of an automobile allows more resilient expenditure of time, greater retail exchanges, and more splurging on leisure activities and products. Even though the export growth of China has been pushed by overseas and foreign-invested businesses, a number of Chinese domestic businesses are starting to come out as aggressive competitors to global products. Possibly the most excellent examples are Legend, producer of computers, and Haier, producer of white products. These somewhat privatized companies started through taking advantage of the domestic market but are at present beginning to export in massive quantities. At present, Haier has almost half of the U.S. market for undersized refrigerators and even American producers and those from other countries (Lo & Tian 2005). For highly industrialized retailers, these flourishing Chinese providers and suppliers are beginning to make available the foundation for new, inexpensive private branded supply. In the near future, this could turn out to be a much serious concern as the domestic market of China becomes relaxed. The solution will be the potential of the Chinese banking system. The basis is that thus far Chinese companies have been capable to endure for several years while losing financial assets for the reason that they can cover their losses through loaning from state banks. Hence they had inadequate motivation to be competent or cost-effective. This opportunity to continued existence will vanish, if and when the banking system develops to be resolved, obliging Chinese businesses to become lucrative or die. Those that are previously cost-effective are showing the possibility (Wolf et al. 2003). With banking development, several more will be compelled to become resourceful and, decisively, world-class. The condition in China, thus, is to a certain extent evocative of Japan and Korea in the recent decades. Those were the periods when domestic companies began to transform into globally competitive, manufacturing low-priced products for export. This decisively led to such global signature labels as LG and Mitsubishi. Moreover, with China’s recent entry into the WTO, China will be demanded to get rid of many inequitable policies that safeguard local manufacturers from foreign competition. Intensified competition will facilitate several Chinese companies to come out as well-built, world-class competitors, particularly if they acquire admittance to credit markets as well as global capitals. The former will come to pass when foreign banks totally partake in the Chinese economy, which is specifically required under the policies of WTO (Lo & Tian 2005). The prospect for Chinese companies appears productive for several reasons. Primarily, Chinese companies by now have a sizeable and increasing share of the profitable Chinese market. Hence, they are enhancing the critical mass needed to contend in a global field. Second, they are advancing their technical expertise, ever more participating in technologically advanced markets such as desktop computers and cellular phones. Lastly, Chinese companies are taking undue credit on the technology enhanced by the United States and Japanese companies. They use up a lower share of profits on research and hence have cost leverage over the global giants. However, one of the most haunting questions regarding the emergence of China as a world factory is how will the country’s economic progress impact other Asian countries? The answer is that it significantly relies on the phase of development of the nation in concern. Comparatively wealthy countries such as South Korea and Taiwan are turning out to be more like its Asian neighbour Japan and the colossal United States with vast service sectors. Employment in these nations will put emphasis on business administration, product customization and development and marketing in contrast to production. For these nations, China’s improvement of the value chain does not yet stand for a warning. To a certain extent, it provides new prospects. As for more impoverished Asian nations such as India, Vietnam, Thailand, Indonesia and the Philippines, they will confront difficulties because of the charisma of China. It is significant to remember that not all production site choices are decided on the basis of low remunerations alone. Furthermore, compensations in Shanghai are, in a number of circumstances, higher than those in Manila, Bangkok and other metropolis located in Southeast Asia. Instead, there are other forces that establish the site of production. China provides skills and competence of high levels, a fairly sturdy infrastructure, and an excellent political atmosphere. It as well provides an enormous domestic market. For the underdeveloped nations, their saving grace will originate from two components: primarily, a necessity for suppliers to expand, particularly in relation to low remuneration strategies; second, a necessity for specialized duties that these nations perform well. Furthermore, these nations can reap benefit from exporting to China. China is turning out to be an enormous importer, and other Asian countries set to benefit. III. Conclusions The entry of China into the WTO has never been an abrupt, one-dimensional episode. To a certain extent, it is a portion of a continuing process that was launched in the recent decades. Countries in Southeast Asia have thus far been able to adapt to the preliminary opening of China in the last decade relatively successfully. The sudden economic growth of the economy of China in the recent decades has ushered in substantial and extensive opulence to the Chinese people. However, that progress has been accompanied by economic, social as well as environmental crises that are now only being felt. On the domestic arena, the filtering-down techniques that transport a portion of the economic progress of China to lower-income groups has dwindled significantly. While the enormous mainstream of the Chinese population continues to experience enduring economic development, the extreme poverty incidence has languished and the extent of economic disparity has intensified across regions and across occupations. On the other hand, on the international arena, conflicts over the trade barriers of China and the rules on exchange rate have turned out to be more frequent and more controversial. The key to these latest dilemmas will demand not merely inventive strategies by China, but as well collaborative strategies with the rest of the world. With the economic growth of China and intensification in efficiency, countries in Southeast Asia will confront more aggressive competition. Hence, they will need to espouse policies and techniques that should facilitate in enhancing their competence and competitive advantages. Following the path of intra-industry transaction in their business with China, they have to search more deeply for new fortes and devise a new trend of specialization. China is currently enduring a descending trend in agricultural relative leverage. With this phenomenon, in addition to the strong emphasis on industrialization, it is predicted that the import requirement of China for food products and essential goods will intensify. The requirement for finer quality and more customization in consumer products, for both organic and non-organic items, are as well anticipated to increase along with the increase in China’s per capita income. All these business prospects are predicted to rapidly increase following the entrance of China to the WTO for the reason that it will result into China’s being more dynamically involved in the internalization mechanism through a more liberal commerce and trade, tourism, banking system, and other basic services. References Bowles, P. & Dong, X. (1994), Current Successes and Future Challenges in Chinas Economic Reforms, New Left Review , 49. Harvie, C. (2000), Contemporary Developments and Issues in Chinas Economic Transition, Houndmills, England: Macmillan. Johnson, D. G. (1982), Progress of Economic Reform in the Peoples Republic of China, Washington, DC: American Enterprise Institute. Nolan, P. & Fureng, D. (2003), Sustaining Chinas Economic Growth in the Twenty-First Century, New York: Routledge. Otsuka, K. (1998), Industrial Reform in China: Past Performance and Future Prospects, Oxford: Oxford University . Wolf, C. et al. (2003), Fault Lines in Chinas Economic Terrain. Santa Monica, CA: Rand. Read More