Evolution of the Global Economic Environment - Research Paper Example

As global trade has grown over the last 20 years, both in terms of global productivity and absolute means, China has sustained their share of global trade and substantially increased their share of global exports of produced goods (Lin 2001). From 1990-2010, at merely more than 10.4 percent (Lin 2001, slide 4), China’s share of global exports was significant. The multinational business is usually perceived as a major motivator for the system of the globalization of production. This is justifiable, because the presence of the multinational business is, in principle, grounded on earlier and major foreign investment (Ostry & Alexandroff 2003).

Furthermore, the past two decades have witnessed a dramatic boost in the operations of multinational businesses in China. Recent reports indicate that there are roughly 65,000 transnational corporations at present (Milberg 2004, 45). Their economic effect can be evaluated through varied approaches. Foreign partners, in 2001, comprised more than 50 million workers in comparison to more than 20 million in 1990 (Milberg 2004, 45). According to the UNCTAD (2002, 1 as cited in Milberg 2004, 45), foreign partners presently comprise about one-third of global exports and one-tenth of global GDP.

Between the 1980s and the 1990s, FDI’s share in international gross capital formation increased by two-thirds; for China, the rise was by about three-quarters. FDI massively rose in the 1990s, even though it dropped abruptly in 2001 due to the global recession and weakening of stock markets (Lin 2001). Hence the reduction in the flows of FDI was tilted toward advanced nations. FDI to China and other developing nations increased 4 percent from 1980 to 2001, and China’s share of world FDI climbed significantly from the early 1990s to 2001 (Ostry & Alexandroff 2003).

Nevertheless, this increase has not been sufficient to make a difference in the share of the developing nations of the global reserves of FDI, which, according to UNCTAD (2000 as cited in Milberg 2004, 46), has changed roughly 35% over the past two decades. China, in the 1990s hardly made it on the international economic scale. However, China was able to improve its status in international trading after roughly two decades, making her the current second most advanced economy in the world (Lin 2001).

The trade of China, in the 1990s, was an insignificant presence in world trade. After two decades, the country is presently the biggest global exporter of goods, with a rate of annual export growth at 18 percent (Lin 2001, slide 6). Due to this massive development in China’s role in international trading, trade structure has been altered. It is the contention of this paper that the transformation in trade structure, or with intensified trade in intermediate rather than final products, instead of expansion in the volume of trade that establishes globalization as a relevant occurrence in terms of the development of strategies for economic growth.

This transformation in the structure of trade is the outcome of the appearance of global trading systems, wherein bits and pieces of a product are manufactured in various places all over the world.