National Difference in Political Economy and Economic Development - China - Case Study Example

Globalization Name of Student Name of Course Name of Class Date of Submission Globalization Overview of globalization Globalization is the world wide movement towards trade, communication, financial and economic integration. This therefore implies that there is an interdependent and interconnected world whereby there is access to goods and services from one nation to the other. However, some factors such as labor may not be considered since some fragile economies may be directly affected (Veeck 2007). National difference in political economy and economic development At this moment, China is experiencing great changes in their economic, social and political spheres. This means that their account on scale and speed is intensified. It is said that there is no country in history that has experienced the amount of growth in industrialization like China. The country is transforming extensively and rapidly. As a result China’s success or failure story depends on its domestic development and may carry serious implications in the region and internationally as well. However, it is still not certain how soon China may become the most powerful economy in the next century. Nevertheless the growth that China is experiencing has already impacted so many lives among the Chinese and also those in the Asia Pacific region. This is so because the standards of living have been raised as more job opportunities have been created. Investment opportunities have also increased especially because of the political stability (Wild 1992). Human welfare, health and education are some of the areas that have been improved due to the economic development. There are countries that raise their Income but do not consider upgrading literacy levels and increasing life expectancy. There has to be a balance between economic growth and how citizens in the nation will cope with all the changes. Development in the economic wealth of a country is defined as economic development. It aims at the well being of the citizens of a particular country since they should be the biggest beneficiaries. If a nation’s economy grows then the citizens should also have better access to social amenities and enjoy investment opportunities in the same country. On the other hand, economic growth is in the increase in the value of the services offered and goods produced by a certain sector of an economy (Veeck 2007). It is expressed in terms of GDP (Gross domestic product) of the country. When the GDP increases then it is said that there is economic growth. Economic development incorporates social issues such as life expectancy and literacy rates with regard to measuring the country’s level of development. Cultural difference and ethics in China Relationship-based versus transaction-based: In china relations are valued and are considered first before economics unlike in the U.S where economics are prioritized. The Chinese do business with people they know and trust. Rather than jumping into business ideas, take time to get to know the person and show them you are interested. Once you have built rapport and trust has developed then the Chinese will begin to share their ideas and their feedback will be genuine. One of the best ways to do this is by arranging for the first meeting at an open place where you can lunch or coffee and really socialize. One therefore should have do serious backgrounds checks on China before attending any of their meetings. Face to face interactions versus doing business without meeting in person: A lot of business deals and activities in China are done after a one on one meeting. In order to penetrate the market in China and succeed in your investments, one has to make several trips there and establish relationships face to face. They consider this a sign of respect and integrity meaning that one has nothing to hide. American companies that have opened branches in China have employed Chinese people to manage things since they understand the culture norms and hence facilitate foreign investment. Other American companies have also partnered with Chinese companies so that they do not directly open a branch in China. Communication style- Comparing the Chinese and Americans it would seem like the Americans are very outspoken and considered as better communicators. This makes it quite difficult for American investors to get the proper feedback and information needed concerning China. Most of the times, there is a required for more formal and informal meetings in order for a company to make their final decision. This is also considered as a huge hindrance for doing business in China. However, as the economy is growing, the need to learn English and communicate properly has arisen and therefore more teachers get hired (Lee 2005). Closing a deal: In China, signing a contract does not necessarily mean that the deal is on. On the other hand like in the U.S that would mark the end of a deal. After signing contracts, one has to do a follow up with the new partner and pursue every necessary action. A contract only means the beginning of a business arrangement. Following up indicates commitment and seriousness to the Chinese people. Trade theory and the political economy of trade Cross border exchanging and international trade is what increases the cost of trading. Factors like time costs, restrictions, legal systems and tariffs are some of the things that make international trade very expensive. In contrast, domestic trade has fewer hustles because the restrictions are considerably low. The Heckscher-Ohlin model insists that international trade should be determined by the factors of production. This theory relates to what China has done since they use locals in their industries and do fewer imports. They use materials which are locally available and also find cheap labor to enhance their economy. China also does a lot of exports and this brings in revenue. This is one of the models that most nations should adapt in case they are looking forward to improving their economy as it gives locals a better chance to bring in their resources and time (Killion 2006). Foreign Direct Investment Projects that require foreign investment take time to implement and this therefore makes the foreign direct investment (FDI) lag behind. It has indicated a decrease in general confidence but has remained strong nevertheless in recent months. Chinese firms have been encouraged by their government to invest abroad as they will become more competitive on an international level. Furthermore, this will slow the quick build up of foreign exchange reserves and utilize surplus capacity. In 2014, inbound foreign investment rose by just 1.7% which was considered very slack. The weak performance was fueled by a cooling economy which insists that Chinese companies should invest in overseas assets which could overtake in bound investment (Veeck 2007). Regional Economic Integration China has experienced explosive economic growth of about 10% each year since the implementation of the policies of reform. In the year 2009, China was named the world’s second biggest economy just after the U.S. However, China suffered greatly from the financial crisis in 2009 which happened globally. Despite these challenges that China has faced in economic globalization, economic integration has developed. Outline and critically evaluate factors from the perspective of China’s attractiveness to international trade and investment that driving the unprecedented progress and make relevant policy recommendations to identified challenges to Cooperation with the International Community: One of China’s plans to improve and plan well for its environment is to tap into the resources and expertise of the international community. China is actually the largest recipient of environmental help from the Asian Development Bank and the World Bank. The non governmental organizations globally have also become very active in China. Most of them have extensive projects in China ranging from energy efficiency, organic farming, environmental protection and permits for sulphur dioxide. Moreover, multinationals, such as BP and Shell have supported the efforts that China is making to improve their environment (Killion2006). They have introduced environmental technologies and practices in their curriculum so that people can learn on the importance of maintaining their environment. The Chinese government has also embarked on researches from locals and even abroad on how to manage their environment with all the industrialization going on. Devolution of Environmental Responsibility to Local Government: The Chinese government since 1989 has tried to devolve authority to the local level. However the result of this was that proactive leaders of wealthy regions performed exceptionally well. For example in Shanghai there is investment of over 3% in environment protection which has improved the water pollution problems and cleaned up the air. In contract, poorer regions have seen their environment deteriorate in spite of the general improvement in the country’s economy. This is because they have fewer funds to invest locally and cannot count on assistance from the center. In addition, the central government monitors activities of the World Bank so that they can ensure most of the money is not transferred to the poorer regions just in case it’s not paid back (Wild 1992). Roles of domestic environments in attracting foreign trade and investment: China's environmental bureaucracy is generally weak therefore personal levels and funding remains low especially to stop the situation from deteriorating further. Without the help of Beijing then the enforcement regimes and regulatory systems are inefficient. There is need for technological fixes and support implementation for there to be an improvement in attracting foreigners. However, with China’s political stability and availability of resources, investment opportunities are on the rise. Systematically evaluate the impact of various factors to a country’s attractiveness Regulatory Environment ​ FDI is attracted when a government in power enforces policies and rules aimed at favoring state entities rather than firms owned by private developers. The regulatory environment can therefore impede or encourage foreign direct investment in China. In spite of all this, it’s important to note that also excessive regulations may act as a barrier for commercial activities. This is because the managers and employees have to spend so much time complying with the rules and regulations. Starting a manufacturing company may require high start up capital, legal exposure and compliance items that may leave the investor doubting to set up which may lead them to move to a country that has easier compliances (Killion 2006). Economic and political stability can enhance an influx of FDI. Stability implies that the opportunities for enterprises can be predicted and hence a better chance to detect what can be improved in the future. Social turmoil, political wars and unrest are not conducive to business. Instability in the economy can also contribute to hyper inflation which can leave China’s currency almost obsolete. Chinese law and order should be respected and followed to the letter to encourage FDI. The justice system should introduce mechanisms that are effective in reducing and eliminating completely the issue of corruption. Although this may take time, it would help a lot in creating better investment opportunities. References G. Veeck, C. Pannell, C. Smith and Y (2007). Huang. China’s Geography: Rowman and Littlefield, Lanham MD. "The Fdi Report 2014 - Asia Pacific". Fdi Magazine. 25 June 2014. Retrieved 17 July 2014. Killion, U. (2006) A modern Chinese journey to the west. New York: Nova Science Publishers, Inc. Thomas, H. C. Lee, p.100 “Education in Traditional China: A History.” Thomas Havranek & Zuzana Irsova (30 April 2011). "Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI". Wild, O. (1992). The Silk road. . Read More