Introduction
Globalization is a process that slowly interconnects the nations of the world through trade, fruitful partnerships and cooperation. Members of the international community derive personal benefits to their economies, growing more productive, prosperous and technologically advanced as a result. In the socio-political landscape of the modern age, the US has emerged as one of the most powerful players. However, the emergence of other strong economies and rapid development of technology has high potential in rivaling the US’s economic prowess. China, specifically, quickly established itself as a considerable force and a strong ally (Witt, 2019). In the recent decades, China’s emergence into the global economic sphere has brought significant changes to international power dynamics and relations. Coming into the competitive sphere dominated by Capitalist nations such as the United States, China has utilized its industry well in order to become an important asset to its collaborators.
Gathering the considerable power of its large workforce and untapped potential of its economy, China quickly caught up to the major superpowers of the world. As discussed in Gale’s paper on populations and the economy, China’s population during the time of the reforms benefitted from a high percentage of working-age adults, many of whom were able to enter the workforce (Johnson, 1999). More than 55% of the entire Chinese population was of the working age during the 1980s and 1990s (Johnson, 1999). An increased involvement in manufacturing and emergent business gave china the much-needed drive towards global development. Both globalization and Foreign Direct Investments into the nation’s industry have allowed it to develop more quickly, becoming a source of valuable, affordable and widely available products. The paper concerns itself with China’s economic development. This work proposes that FDI’s, work of Multinational Companies, and relationships with other countries were among the most vital components towards China’s rise to prominence. Economic papers, research papers and discussions on the topic were examined.
Starting out from the country’s socialist roots, a look at its progression in the global sphere is attempted. Foreign Global Investments provide economic inertia, promoting technological development and informational exchange within the country. Globalization, and the facilitation of trade assisted China in securing partners around the world, and realizing its own niche in the global exchange of goods. Manufacturing exports remain as the main source of income for the nation, fueled by low tariffs and China’s unique strengths as a nation. Participation in WTO is another significant asset for the country, as it gives China both economic and social benefits. It is asserted that further engagement with the global market, including participation in international organizations and trade relations will lead to further economic prosperity, technological advancement and the strengthening of the consumer class within the nation.
State of the Manufacturing Industry
Manufacturing is one of China’s primary strengths, an area supported both by the government itself and FDI’s (Shaoming, 2014). Examining its growth can be beneficial towards guiding its future expansion and contextualizing its presents in contemporary China. During the time of the cultural revolution, China has had the opportunity to develop its industries to be considerably self-reliant and innovative. The regions were developed unequally, with the west being considerably less technologically advanced. Centrally-controlled manufacturing was the preferred system of control, allowing the government and the CCP to maintain its system of government while also encouraging development. However, other types of manufacturing ownership also existed, including individual and collective options. It should also be noted that while the industry was organized, a government-controlled system of management discouraged innovation or risk-taking, leading to China’s industry being far less proficient than its contemporaries (Ni, 2015). Much like other strongly controlled economies, China relied on a large workforce and the availability of resources first, disregarding the need for quality improvement in manufacturing. The problem, however, was realized by the government, prompting a move towards securing innovation from the outside.
China’s Closed Economy, a Look in the Past and a Way Forward
During the 1980s, China’s socialist regime focused on internal control and self-sufficiency, maintaining a rigid system of organization and management. Within the centralized government system, planned economic growth and the distribution of resources were used to maintain order. Similarly to the Soviet Russia before it, the country relied upon its internal resources and limited collaboration in order to sustain itself. With a large workforce and a centralized government management, it was possible to effectively produce the necessary goods and services in order to function without foreign intervention (Ghose, 2014). Innovation or growth was limited, as were the sources for potential profits. Additionally, a number of problems unique to the nation’s style of governance emerged over the years. In particular, the existence of the centralized government proved itself to be ill-suited towards fulfilling the needs of the people, and meeting their demands as active consumers.
Most notably demonstrated by the Great Chinese Famine and the failure of the Great Leap forward, the planning-based organization often failed to provide the necessary resources to its people, either wrongly allocating them or being wholly incapable of producing the necessary amounts (Li & Yang, 2005). Before the changes discussed in this paper, China followed a system of government-controlled production, delivery and distribution. The central plan issued over a period of time was made in order to fulfil the needs of the people in an area, taking the resources of every working individual and giving them to people according to their needs. However, this system was plagued by problems, including mismanagement and an inequality of outcomes. China suffered from poor bureaucracy and an unequal distribution of resources, leading to a disparity of life outcomes (Li & Yang, 2005). Wrongful diversion of resources and over-reliance on quantity over quality of agricultural production were among many failings of the Chinese government at the time, leading to one of the largest disasters in the history of the nation (Li & Yang, 2005). After massive population losses and a widespread disdain for the government, the need for change became apparent.
With the decline of the USSR, the need to make new allies in both trade and economic relations became apparent. The previous economic reforms of the CCP were plagued by inefficiency and a constant need for administrative interventions (Wong, 1986). After the Great Chinese Famine, the constraints of a centrally-managed closed system became more apparent, and the government started strides towards a different economic structure (Li & Yang, 2005). With the emergence of European nations and the US as important global players, the prospects of collaboration and international relations also became more attractive.
The process of opening up the economy brings with both positive and negative implications, leveraged by the prevalence of long-term benefits. While wage instability and price fluctuations are expected on initial stages of the process, research has shown that globalization brings economic benefits to countries that engage in it (Rama, 2003). It is noted that wages of people within globalized nations grow more significantly than in non-globalized countries, signifying better spending power and quality of life. A transition towards a socialist market economy, worked as a compromise between openness and control-focused state ideology (Suliman, 1998). Maintaining both the flow of innovation and cultural development was among the primary goals of China’s development at the time, coordinated to push well-rounded progress among the masses (Suliman, 1998). In accordance with this government structure, the government, with state-owned factories and businesses, oversees part of China’s industry (Yukyung, 2020). Central government maintains its overall control over both private business and local government, having mutual incentives towards collaboration (Lei & Nugent, 2018). In addition, the Chinese Communist Party, and Congress play a vital role in collaborating with businesses, who often have to operate in accordance with the wishes of the ruling party (Lei & Nugent, 2018). Local government firms, foreign companies and other types of free market business structures emerged simultaneously with more centralized market entities, forming a unique relationship between the state and business. Decentralization of the regional government served to give more freedom to individuals, while the expansion of non-state enterprises helped new reforms promote growth (Qian, 1999). In the period from 1978 to 1993, the percentage of such organizations increased from 22% to 57% (Qian, 1999). As shown by the figure (Lei & Nugent, 2018), economic policies work on a system of incentives, with private firms engaging with the Chinese government in exchange for benefits or preferential treatment. Central government persists as the most important link of the country’s overreach, using local management and associations to reach its smaller goals.
With the need to innovate, and work with other existing economies serving as the basis, China stayed on the road leading towards an open economy. A focus on manufacturing and trade as its primary methods for development, policy and other initiatives were primarily selected to improve the manufacturing quality, speed and capacity (Wen, 2016). Favorable government legislation encouraged the use of FDI’s and supported multinational companies in setting up business. Tax cuts, preferential treatment and protections were offered to emerging actors on the scene. A promise of solid returns, and the appearance of a new, previously untapped market attracted attention from international businesses, companies and organizations, engaging China in the process of globalization. A move from the previously tightly government-lead manufacturing towards a more capitalistic system further assisted the nation in interacting with others.
Effects of the Capitalist Shift, Emerging FDI Influence
The discussion of China’s efforts of opening up and expanding its industries is complicated and diverse, including the storied history of the region, its policies, economic and political uniqueness, and a strive towards outward growth. In order to properly discuss or understand China’s current position on the world arena, it is necessary to consider how international investments into its manufacturing emerged as a primary source of innovation. In addition, the role of Multinational Companies should be considered. The history of the nation before its recent emergence will be considered, among other factors vital to forming a complete image of the nation’s economy.
With a global push towards integration, interaction, and globalization, however, fruitful opportunities started presenting themselves. The creation of new technologies have contributed towards traditional territorial barriers between nations dissolving, encouraging more interactions. Furthermore, both other Asian countries and European nations begun to trade more, giving China a new avenue for growth. Coupled with various government policies the encouraged foreign trade, the ability of international entities to operate became freer than ever (Contractor et al., 2020). After a recent cultural revolution, the inflow of finance and innovation into the nation was needed in order to stabilize the economy and give the people an ability to lead successful lives. Both close allies and faraway nations have found the ability to trade with china, namely India, Japan, Great Britain and the US. A wide web of collaborators has helped the country to properly adapt to the changing world climate and gain a steady supply of revenue from its exports.
From an ideological and political perspective, the centralized system of government employed in China required change. As discussed by Gao (2017) in their work about China’s FDI policies and legislation, an autocratic regulatory system facilitates certain modes of operation within itself. Avenues for a nation’s growth are decided, directed and realized directly through the country’s government, as the central authority commands all future plans. Instead of facilitating innovation or growth in the business or economic sphere, companies or enterprises exist solely as a means of realizing the goals of the ruling party (Gao, 2017). Similarly, individuals are less capable of finding the work they want to perform, instead having to work in government-regulated industries.
Compared to a free-market capitalist system employed in many foreign countries, such a method of organization discourages innovation, instead promoting slow and sustained growth (Gao, 2017). Concepts of individual as an economic unit or private business do not exist in a full capacity, as an overarching centralized bureaucracy. While having its merits, a centralized government is unable to quickly adapt to changing circumstances, or take advantage of quickly developing technological advancements. Comparatively, a system of both private and government-managed business has the flexibility and resources to promote change within the economy. As shown by research, it is necessary for government entities to support business through policy, favorable treatment and other practices in order for it to flourish (Tian et al., 2019).
Within its perimeters, China has embraced the complicated implications of coming into contact with the wider world, maintaining its unique sense of self and focus. An embrace of the socialist market economy was the primary way for China to accomplish this task while incorporating its ideological principles into the process (Suliman, 1998). The present understanding of this change within Chinese society remains mixed, however the impact on the world at large is much more easily evident (Breslin, 2018). Chinese manufacturing brought benefits to other nations and its own domestic market, producing large quantities of products and wealth. Ever since the trade has been opened, China’s economic growth remained among the fattest, allowing the country to double its GDP every 8 years (Morrison, 2019). While the emergence of a globalized economy opened up new possible problems, such as worker exploitation and corruption, it has also upset the global power balance significantly. In addition, the process kick-started the growing relationship between China and FDI’s. Foreign investments, accompanied by the work of multinational companies, helped the manufacturing industry quickly recover and adjust to the needs of the open market. Interest in China’s market grew proportional to its growth potential bringing with it even further industry acceleration and a quicker flow of capital.
Joining the WTO and the Rise of the Chinese Manufacturing
The relationship between China’s manufacturing industries, the government and the WTO is especially complex. The inclusion into a global organization allowed the country recognition required in the public arena, while also imposing unique limitations in terms of following WTO regulations (Chan, 2004). Due to a specific style of economy employed by China, the ability of the WTO to effectively hold negotiations or promote its policies lessens, as the nation desires to maintain the superiority of its government structure before foreign influences (Gao, 2021). From China’s side of the discussion, a membership promoted global growth, brining specific economic, social and political benefits.
The cooperation with WTO introduced many benefits to the Chinese economy. Tariffs reductions helped the country to amass further profit, and incentivize exporting its products to other nations. In particular, manufacturing exports rose dramatically, forming the majority of exports the country produces to this day (World Trade Organization). From the perspective of the organization, however, the differences in organization and economic structure were a significant problem in working with China (Gao, 2021). Agreements and contracts regarding the nation’s admittance were among the most prolonged of all members, partially due to the uniqueness of China’s socialist market economy (Gao, 2021). The nation desires cooperation on its own terms and public recognition of its unique approach toward governance. Approaches toward government structures favored by the WTO mostly consider the government as a system needing constant checks and regulations. The relationship between the people and their nations is a struggle for protected autonomy. For China, however, the central government act as a guarantee of order, quality, peace, and equity. Without a strong government influence, it is impossible to fulfill the needs of the many and “rejuvenate the nation” (Gao, 2021). Countries within WTO increasingly strive for looser government overreach in private and business affairs, while China seeks to reinforce it. As outlined by scholars focusing on the topic, the inclusion of China in WTO can be seen as both a large benefit and a source of disruption. With the growth of the Chinese economy, a perpetual rise in manufacturing capacity, and foreign direct investment, it is impossible to ignore the nation. At the same time, regulating its participation and cooperation with other members of the WTO becomes difficult.
Within the economic sphere, the difference between China and other members of the WTO is especially notable. A discrepancy discussed below can be used to understand the nation’s focus on domestic economy instead of imports (Ali & Guo, 2005). Nations such as the US, for example, largely support laissez-faire capitalism, embracing the lack of control the local and national government has on the markets. In China, however, the prosperity and success of market is ensured expressly through government intervention (Gao, 2021). The central authority issues specific plans for development, and focuses on specific areas of industry, manufacturing or services. A precise, calculated focus allows China to develop within its own expectations, while also imposing tight regulations on all inside participants (Lei & Nugent, 2018). As a whole, it can be said that while the relationship between the two entities is complicated, it has brought significant benefits to both participants, including economic prosperity, respect and a voice in the global community. For China, the process of joining a global organization signified more trade partners, bigger revenues and many structural changes to its economy. Previously, one of the notable aspects of China’s economy was its fragmented nature. Specific industries flourished within certain parts of the nation, which limited access to resources for citizens. Through selective development, the central authority was able to concentrate its efforts on vital areas, subsequently ignoring the others (Lemoine, 2000). Active participation in the global effort, membership in international organizations and the influx of FDI’s however, gave China the necessary resources for a more thorough development strategy. The change fuels more equal spread of manufacturing areas within the nation, and increases the accessibility of various goods to the public. In addition, the WTO status opens up trade opportunities with other nations, improving access to foreign goods for customers, consumers and other Chinese entities.
Present State of Manufacturing
In order to maintain a competitive edge, it was necessary for the country to become more interconnected with others, which has ultimately opened up opportunities for growth. The trend is connected with the relationship between business, government and innovation. Interacting with other global entities gives both businesses an ability to develop (Rzepka, 2017). As highlighted by the authors from the Serbian Journal of Management, innovation is an important facet of entrepreneurship, being largely responsible for consistent a competitive advantage (Anna et al., 2013). Through devising new methods of production, marketing, transportation and negotiations, companies are able to become more successful. Inter-organizational relationships, formed as a result of globalization, then, are a source of innovation and change (Rzepka, 2017). A globalized national economy gives its companies more opportunities to grow, increasing the flow of capital, information and technology into the nation. This trend was further highlighted by (Feng et al., 2019), who examined the relationship between globalization and the state of Chinese manufacturing firms. Performing an overview of datasets from 596,809 firms, they concluded that globalization (provincial globalization in particular) is beneficial to innovation. In its development.
Utilizing globalization, the manufacturing industry in China became one of its biggest strengths, and many businesses emerged on the scene. One of the more crucial changes in the present decade concerns the structure of Chinese manufacturing. In previous decades, state-owned enterprise and manufacturing firms owned by local governments were the primary actor on the economic scene. Their prevalence fell in line with both the Chinese government’s overarching social control and the need to allow more diversity within business. Throughout the most recent decade, however, many more private enterprises emerged, overshadowing the influence of SOE’s. As Liu (2018) explains, this trend was caused both by the encouragement of private investment in this sector of the industry and the comparative efficiency of private businesses.
In discussing Chinese manufacturing, it is important to also highlight some of its existing problems. In their overview, Liu (2018) notes a restricted access to finance, bureaucratic inefficiency in the government, corruption and ineffective policies. Schwab, K. & X. Sala-i-Martín (2015) also highlight a significant hurdle in adopting new technology into manufacturing. Compared to the major manufacturing economies of the US, Germany and Japan, China is unable to match their investment into research and development (Sala-i-Martín & Schwab, 2015). In the initial stages of its globalized development, China was able to take advantage of its large working-age population in order to quickly develop its industry (Johnson, 1999). In the modern age, Liu further asserts, the age of the population has increased, and less people are able to work (Liu, 2018). The lack of labor on the market increases its cost, contributing to another emergent problem of China’s manufacturing. Another important but previously not covered issue is the environmental implications of Chinese manufacturing industry. Since 2000, the CO2 emissions of China’s manufacturing has increased drastically, having an average annual growth rate of more than 8% (Shi et al., 2019). The heavy use of coal in industry is the reason for large carbon emissions. Manufacturing industry remains the largest pollution within china’s entire market, hindering the movement towards sustainable business both domestically and internationally. All of these emergent problems underline a need to introduce change. It is necessary to consider the existing problems of China’s manufacturing sector, as well as China’s position in the global market in order to effectively improve the field.
How China’s Regulatory Sphere Facilitates FDI’s and MNC’s
The opening of the economy has changed the understanding of law relating to production within China. Under a centralized rule, the presence of legislation was unnecessary, as a government plan could be properly adjusted to address any potential issues with its completion (Gao, 2017). After a shift towards a more free economic order, however, it became necessary for the Chinese government to additionally regulate foreign entities. The development of China’s FDI legislation acts as a microcosm of its struggles between socialist and capitalist principles. Established government plans required specific investment into various areas of the industry, with stable growth as its goal. At the same time, ideals of the free market dictated a more lax approach towards financial regulation, aiming to promote better efficiency and financial gains.
As previously highlighted, China Employed Specific strategies and approaches towards supporting, encouraging and directing FDI’s within its borders. For the first 20 years from 1979, a clear focus on the development of coastal areas of China was established (Shaoming, 2014). The eastern coast was seen as a starting point toward the country’s uneven development. The creation of manufacturing areas closer to the borders was to slowly spread out to the inside portion of China. This approach, however, created significant economic and resource inequality within the nation, requiring the government to shift its focus towards. As it stood, the division between the eastern coast lines and the western side of the country grew considerably since 1979, aided by the presence of previous developmental advantage in the former (Shaoming, 2014). In 1997, Chinese government has started a new initiative towards supporting western-oriented investment (Shaoming, 2014). A push towards western development and the creation of favorable tax conditions for investors allowed the Chinese government to shift the investment influx.
Multinational corporations, or MNC have also been affected by the unique economic conditions of the Chinese government. As previously outlined, companies and foreign actors enjoy the privileges of tax reduction and preferential treatment, however, they must also abide by a certain number of regulations within the Chinese market. The manufacturing industry, in particular, is noted for comparatively soft regulations regarding international companies. An international company is always in a state of direct negotiations with China’s government body, affecting the outreach and opportunities available to potential entrees (Economist Intelligence Unit, 2004). With an increasing rate of production and continuous investment from FDI’s, China continues to mature into an extremely valuable source of profit. As early as 2000 at least 400 of the 500 most famous MNC’s were able to invest into China (Regina Chen, 2004). Ever since it’s opening, the Chinese manufacturing sphere continues to be difficult-yet-rewarding to navigate.
Investment Overlook, Major Investors and Investees
In discussing FDI’s it is also important to consider who the investors primarily were, as it gives insight into which nations or businesses considered China to be a an important asset on the world arena. Hong Kong, and Taiwan, by extension, exist as the primary FDI sources, owning partially to the favorable geographic conditions and a long history of relations between them and China. After them comes Japan, the US, Germany, Macao and other nations. As noted in the overview, the disparity between the Hong Kong and the investors below it are primarily attributed to cultural and linguistic advantages they are provided, which help to secure deals with minimized risks and costs.
Influence of Foreign Direct Investment
Foreign Direct Investment has a special relationship with China’s economic order, being present shortly after the nation’s opening. During the initial stages of China’s opening to the global market, a cultural revolution took place. Striving to move away from a socialist structure as a result of its many problems, the nation began to look overseas for potential options (Lemoine, 2000). While it was impossible to fully abandon the existing structure of leadership, production and control, China decided to change it in accordance with its needs. Major failures of central planning included an improper management of public resources, and a rigid structure impermeable to fast change. In the 70s and 80s, the country started the effort of restructuring itself from within. With the many changes coming into Chinese, society, an economic instability also emerged. In order to quickly bring the economy into order and establish a flow of capital, the Chinese government needed to promote outsider investments (Garnaut et al., 2018). As a developing nation entering a global space, the country attracted many investors and collaborators willing to use their money to grow its economy, including Hong Kong and Japan (Garnaut et al., 2018). FDI’s are among the most vital reasons behind China’s rapid growth. Investors brought the needed funds to the varied developing industries of China, started their own joint businesses, and brought the technical knowledge of the outside world. While subject to tight regulation, they were still able to prosper with careful planning and consideration (Yukyung, 2020). A centralized economy is unable to focus on innovation, or channel finances in areas falling outside of its priority areas. Figure 3 shows some of the most prominent investors into China’s economy, highlighting the role close neighbors play in its growth.
Attracting New Capital
In order to flourish in the changing world of today, China needed change. The government-lead initiative towards development has both helped and hindered China in the past, and the coming of the new decade only showed the necessity for massive adjustments. The controlled planned economy of the nation, while reliable, was unable to sustain rapid innovation needed to succeed in a growing world economy. The attraction of foreign capital was among the only pathways available to China in its effort to keep up with the global community.
China’s market and industry at the time presented significant interest to foreign investors, and had a variety of pathways towards securing financial support. One of the biggest apparent strengths of the nation is the size and availability of its land and labor. A sizeable amount of surface area available for development gave companies incentive for getting into the market, which gradually withered out over time. Due to an ever-increasing population, effectively dominated by men, the industrial spheres in the country profit from possessing a strong working-age reserves. A further urbanization of many of the country’s parts has also helped in procuring the necessary workforce for outward expansion. Since 2003, the rate of urbanization has been rapidly increasing, peaking at more than 50%. Most companies choosing to invest into the market have arrived during a period of expansion, where China was still attempting to adjust its economy to a new type of organization.
With the increase of public interest and creation of more credit, the demand for products was rising. It should be noted, additionally, that firms wholly owned by foreign actors saw far less success than those that joined forces with Chinese manufacturers in equity joint ventures, which is indicative of a trend in the Chinese market as a whole. Conditional entry conditions mediated much of the potential success an commercial entity would have in China’s industry (Contractor et al., 2020). As shown by the disparity, China fosters a unique need in investors to cooperate with natively Chinese companies instead of going fully autonomous.
Another avenue for attracting new investment to the market could be found in the political sphere. In the period of from 1990, the government has given local authorities more power over approving foreign investments, while also encouraging cooperation and creation of joint ventures. The continued subsequent support for the initiative helped many FIE companies grow and develop. Furthermore, organizations funded through direct foreign investment also enjoyed preferential treatment compared to wholly domestic ones, as outlined through policy. Depending on the specific region of the country, the degree of support for FDI’s varied, in an effort to direct innovation to less developed areas (Shaoming, 2014).
Effects the FDI and Benefits for Chinese Industry
Capital, new technology, information, skills and other intangible assets are all transformed into China’s own national strengths, using the outside influence in order to facilitate growth (Garnaut et al., 2018). Technological development has been and remains one of the most important notions in economics, allowing a country to improve its production capacity, increase efficiency and costs (Sun et al., 2020). Therefore, a focus on FDI’s allows China to improve many areas of its manufacturing industry at once. In order for FDI’s to be effective however, a productive relationship with the local and central government is key (Ali & Guo, 2005). In addition, relevant contemporary research shows that FDI’s are conductive towards introducing innovation into the nation (Feng et al., 2019). Based on the performance of current Chinese manufacturing firms, experts recommend encouraging more foreign direct investment. In addition to the aforementioned benefits the promotion of FDI’s presents, evidence exists to suggest that the practice can positively affect the environment (Sung et al., 2018). A panel approach was used to measure the effects the introduction of foreign direct investments has. Sung et al., 2018 states that FDI introduces new technology and expertise to manufacturing, allowing companies to reduce their carbon footprint. According to the current agreements between the WTO and China, the nation uses FDI’s in order to promote sustainable development.
Several concerns can be brought up regarding FDI’s, their promotion, regulation and effects. According to data collected from Chinese entrepreneurs, most barriers for FDI come from either the political or legal environment of the nation (Ali & Guo, 2005). Such considerations as high labor costs, and a focus on domestic economic growth also hinder the appearance of more direct investments in the country (Ali & Guo, 2005).
Despite these problems, the graph shows that foreign investment into the country’s manufacturing has grown rapidly over the years, correlating with its lightning-fast growth. Hong Kong, British Virgin Islands, Japan and the United States are among the largest sources of FDI for the nation, being responsible for the majority of funds received by Chinese producers (Garnaut et al., 2018). As mentioned previously, FDI’s have a complex impact on the economy, providing not only economic, but social and technological benefits (Garnaut et al., 2018). Additionally, the presence of foreign investors poses the Chinese market as a profitable entrance option, in turn driving more economic traffic and collaborations. As noted by researchers, the country’s regulatory environment, and the ability to enforce contracts, have likely bore heavy influence on the desire of investors to contribute to the Chinese market (Contractor et al., 2020). FDI’s were, therefore, used by the Chinese government as a useful tool for procuring new manufacturing assets, improving growth, and attracting collaborators without direct intervention.
Globalized China, Results and Influences, Recommendations for Future Development
Within roughly half a century since China’s emergence into the global sphere, it can be said that the nation embraced the concept of globalization much more thoroughly than before. Taking advantage of the world’s many countries, China successfully forged connections and paved its way forward as an irreplaceable cog in the international machine. As noted by Branstetter and Lardy (2006), China’s rates of market liberalization dramatically increased around the 1990s, and further expanded upon the country’s accession by the WTO. Authors further note that the heightened competitive and collaborative presence of China helped both itself and other nations (Branstetter & Lardy, 2006). Consumer welfare of Chinese people improved, while other nations around the world enjoyed the benefits of the country’s exports. In addition, scholars have noted that the interference of multinational firms into a previously closed economy, in addition to imports and exports, drives domestic market players towards innovation (Gorodnichenko et al., 2008). Greater competition and the presence of fresh forces inside the economic sphere brings forth the need to present better value, to develop more sophisticated methods of manufacturing, or optimizing production costs in order to stay relevant.
Potential Recommendations
As previously outlined in this work, the promotion of FDI is necessary to increase the efficiency of the Manufacturing industry, facilitate technological advancement and reduce the environmental costs of the field. Environmental considerations have become considerably more prominent in the recent years, and finding proper pathways towards reducing pollution is a necessity for manufacturing (Shi et al., 2019). Remaining as the sole biggest creator of CO2 in China, heavy manufacturing requires investment of both finance and technology to promote sustainability. Therefore, Chinese government must further work on making FDI regulation less bureaucratically taxing and more streamlined (Liu, 2018). FDI’s have been shown to effectively improve operational efficiency, as well as develop quickly in a globalized economy. Similarly, these processes contribute to lessened carbon emissions (Sung et al., 2018). The process will allow more businesses in this sphere to procure profits despite increasing labor costs, introduce innovation and work in an increasingly interconnected world.
Conclusion
In conclusion, China’s economy has experienced unprecedented growth and development within the global space. Coming from a socialist nation with closed borders, the country has transformed itself into an open space for collaboration that still honors its traditions. As a consequence of many decisions made since the 1980’s, China has managed to establish itself on the global market as a vital trade partner, a worthwhile investment area and a nation with large potential. The ability of the Chinese market to grow, accommodate many foreign business, and support their endeavors with a high degree of security makes the country a viable target for international entities. Globalization, a force that came into prominence in the recent decades, became China’s central driver towards innovation, collaboration and improvement. With the need to compete in a public arena, China uses its assets and strengths in order to appeal to its partners and impose a large global presence. Through a combination of tactics, the country has managed to rival the influence of the US, an unstated leader within the world economy.
Using a unique system of economic governance, China combines state-managed business with privately-owned firms, using a fusion of socialist ideology and modern capitalism. While the adaptation into the modern global setting took significant time and effort, China experiences the financial benefits of its collaborations. The WTO remains an important partner in the country’s relationship with others, forming a complicated but respectful coordinated effort with the nation. Decreased tariffs and more potential exports remain as a source of profit for China, allowing it to function within a system built towards capitalist nations. In addition, other factors, such as the presence of FDI’s have helped the country develop. Direct investments from forms were implemented as a part of the government’s response to crisis, and since then have been widely utilized to this day. Investment in manufacturing brought many positive changes with it, including new technology, skill and talent – all of which were desperately needed in the quickly changing Chinese landscape. Innovation and growth of manufacturing brought many economic prospects to the country, while also putting the question of sustainability at the forefront of the nation’s concerns. In order to continue developing industry and decrease the negative impacts on the planet, FDI must be further integrated into manufacturing. Through more lenient policy, improved bureaucracy and financial incentive, the government must continue encouraging foreign investment.
References
Ali, S., & Guo, W. (2005). Determinants of FDI in China. Journal of Global Business and Technology, 1(2).
Anna, Z., Artur, B., & Adam, M. (2013). How can the state support the innovations to build sustainable competitive advantage of the country. Serbian Journal of Management, 8(2), 255-267.
Branstetter, L., & Lardy, N. (2006). China’s embrace of globalization.
Breslin, S. (2018). Global reordering and China’s rise: Adoption, adaptation and reform. The International Spectator, 53(1), 57–75.
Chan, G. (2004). China and the WTO: The theory and practice of compliance. International Relations of the Asia-Pacific, 4(1), 47-72.
Contractor, F. J., Dangol, R., Nuruzzaman, N., & Raghunath, S. (2020). How do country regulations and business environment impact foreign direct investment (FDI) inflows? International Business Review, 29(2), 101640.
Economist Intelligence Unit. (2004). Coming of age. Multinational companies in China. The Economist.
Feng, G., Zheng, M., Wen, J., Chang, C., & Chen, Y. E. (2019). The assessment of globalization on innovation in Chinese manufacturing firms. Structural Change and Economic Dynamics, 50, 190-202.
Gao, H. (2021). WTO reform and China: Defining or defiling the multilateral trading system? Harvard International Law Journal. Web.
Gao, S. (2017). The Evolution of China’s Foreign Investment Policy and Law. Penn State Law, 1-328.
Garnaut, R., Song, L., & Cai, F. (2018). China’s 40 years of reform and development: 1978-2018. ANU Press.
Ghose, B. (2014). Food security and food self‐sufficiency in China: From past to 2050. Food and Energy Security, 3(2), 86-95.
Gorodnichenko, Y., Svejnar, J., & Terrell, K. (2008). Globalization and innovation in emerging markets.
Johnson, D. (1999). Population and economic development. China Economic Review, 10(1), 1-16.
Lemoine, F. (2000). FDI and the Opening Up of China’s Economy, 1–98. Web.
Li, W., & Yang, D. (2005). The Great Leap Forward: Anatomy of a central planning disaster. Journal of Political Economy, 113(4), 840-877.
Liu, K. (2018). Chinese manufacturing in the shadow of the China-US trade war. Economic Affairs, 38(3), 307-324.
Morrison, W. M. (2019). China’s economic rise: history, trends, challenges, and implications for the United States. Congressional Research Service.
Ni, J. (2015). China’s Manufacturing Successes and Pitfalls. World Economic Forum.
Qian, Y. (1999). The Institutional Foundations of China’s Market Transition [Paper presentation]. World Bank’s AnnualConference on Development Economics, Washington, D.C.
Rama, M. (2003). Globalization and the labor market. The World Bank Research Observer, 18(2), 159–186.
Regina Chen, Y. (2004). Effective public affairs in China: MNC‐government bargaining power and corporate strategies for influencing foreign business policy formulation. Journal of Communication Management, 8(4), 395-413.
Rzepka, A. (2017). Inter-organizational relations as a one of sources of competitive advantage of contemporary enterprises in the era of globalization. Procedia Engineering, 174, 161-170.
Sala-i-Martín, X., & Schwab, K. (2015). Global competitiveness report 2015-2016. Global Competitiveness Report 2015-2016.
Shaoming, C. (2014). From East to West: The Evolution of China’s FDI Preferential Policies. Journal of the Washington Institute of China Studies, 1(1), 60-77.
Shi, Y., Han, B., Zafar, M. W., & Wei, Z. (2019). Uncovering the driving forces of carbon dioxide emissions in Chinese manufacturing industry: An intersectoral analysis. Environmental Science and Pollution Research, 26(30), 31434-31448.
Suliman, M. O. (1998). China’s transition to a socialist market economy. Greenwood Publishing Group.
Sun, Y., Li, L., Shi, H., & Chong, D. (2020). The transformation and upgrade of China’s manufacturing industry in Industry 4.0 Era. Systems Research and Behavioral Science, 37(4), 734–740.
Sung, B., Song, W., & Park, S. (2018). How foreign direct investment affects CO 2 emission levels in the Chinese manufacturing industry: Evidence from panel data. Economic Systems, 42(2), 320-331.
Tian, Y., Wang, Y., Xie, X., Jiao, J., & Jiao, H. (2019). The impact of business-government relations on firms’ innovation: Evidence from Chinese manufacturing industry. Technological Forecasting and Social Change, 143, 1-8.
Wen, Y. (2016). China’s rise from agrarian society to industrial power | St. Louis fed. Federal Reserve Bank of St. Louis | Economic Data, Monetary Rates, Economic Education.
Witt, M. A. (2019). China’s challenge: Geopolitics, de-globalization, and the future of Chinese business. Management and Organization Review, 15(4), 687–704.
Wong, C. P. (1986). The economics of shortage and problems of reform in Chinese industry. Journal of Comparative Economics, 10(4), 363-387.
World Trade Organization. WTO. (n.d.).
Yukyung, Y. (2020). Varieties of state regulation: How China regulates its socialist market economy. Public Administration, 99(1), 207–209.