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International Business and Rapidly Developing Economy - Essay Example

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The paper "International Business and Rapidly Developing Economy" highlights that even though China is no longer a strictly communist state but it is yet to embrace a democratic stance which would further increase its chances of becoming a superpower in the near future…
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International Business and Rapidly Developing Economy
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?International Business International Business [The of the will appear here] [The of the id will appear here] [The of the course will appear here] [The name of the course number will appear here] Using one of the following countries – Brazil, Russia, India, China or South Africa, Mexico, Nigeria or Turkey identify and critically evaluate the key economic, political and technological factors conditions that have enabled it to become a ‘Rapidly Developing Economy’ or ‘Emerging Economy’. Introduction Emerging economy is a term coined to define ‘a country in which its natural economy grows rapidly, its industry is structurally changing, its market is promising but volatile, its regulatory framework favors economic liberalization and the adoption of a free market, and its government is reducing bureaucratic and administrative control over business activities’ (Luo, ). One such country is China or officially named as The People’s Republic of China. China is one of the most populous countries of the world. It is also considered to be a communist state among five other communist states still found in the world. In fact China is both a communist state as well as a socialist state, having being ruled by The Communist Party as well as the Working class. China, in the recent decades, has been able to develop a perception of a country that excels in manufacturing, be it electronics or textiles. Having a population of more than 1.3 billion people, this country has the advantage of providing cheap labor for businesses around the world; and thus China is considered to be the chief option of organizations wanting to open up business units outside their home country. In this paper, an attempt would be made to evaluate the political, economic and technological factors that have led to the consideration of China as an emerging economy. Based on this evaluation, recommendations would also be made in this paper. Since China is an emerging economy, it is safe to assume that the political, economic and technological aspects of China are far from perfect, thus recommendations developed in this paper would provide a better way forward for the country. Background of People’s Republic of China China, the most populous country in the world, is located in Eastern Asia which a population exceeding 1.3 billion people. The capital city of China is Beijing, known for its trading. After China adopted is economic reforms in 1978, it became the fastest growing economy in the world. However, due to the large population of China, this growth has still not allowed the country to enjoy the position of a developed nation (LeFleur, 2003). China is known for its manufacturing around the world and thus is the biggest exporter of all kinds of goods to the world. Since the population of China is very high, imports also form a substantial part of the economy. This results in China being the second largest importer of products from all over the world (Lardy, 2001). Having a rapidly growing economy, China is often considered as a threat to the United States. This is because China has been able to exercise considerable power over the rest of the world as foreign investment flows heavily in the country and this country also invests in other countries. Thus, this country is a potential super world in the coming times. Despite its growing economy, China is ruled by the Communist Party which has immense control over the economic and other affairs of the country. This to a certain extent has hampered the growth of the economy. Evaluation of Political Factors In terms of political factors, this paper would refer to the political parties ruling the country and their impact on the overall economy of the country. China is a country ruled by the Communist Party, with interference from the working class on some levels. Thus the country is ruled on the basis of both socialist and communist forms of government. These two opposing powers form the two main parties within the China, namely the Chinese Communist Party (CCP) and the National People’s Congress (NPC). Of these two, the current ruling party in China is the Chinese Communist Party that has been in power in the country since the past few decades. It was the CCP that renamed China as the People’s Republic of China after the Civil War of 1949 where the party gained victory against the Nationalists (Zhongqing, 2003). The CCP has followed an approach which is characterized by complete authority, set of rules and laws and monopoly over others and any factor, person, party or country threatening this approach of CCP has been pushed out from the system. This is done to ensure that CCP is allowed to practice its own approach for ruling over China. The economy of China is also shaped by the communist party. The communist party along with other political institutions aims to make foreign and domestic policies such as the monetary, fiscal, labor and trade policies in order to maximize the trade and investment activities and minimize the political, economic and financial risks in China. This is done to protect and increase the investment influx, provide security for investors and increase opportunities for countries willing to export to and import from China (Library of House of Commons, 2006). The bureaucratic administration of China is not vulnerable to change and reforms. Although the minor parties and other political institutions in China have adapted newer world politics and they have gone under reforms, but the major political party of China has been resistant to any kind of change or reform. This hesitation has made the administration of China rigid and has made China backward in the way that other countries have adapted to new reforms and have brought a change in the way the political party of China has managed its external and international relations. This means that due to the backward and bureaucratic administration of China, the way China has managed its trade relations, its investments and its economy has been different and not in line with the other countries which have accepted reforms in their systems (Library of House of Commons, 2006). The strengths of the political party of China comes from the fact that it is governed by a single political party which means that it has really less political instability and the system is governed by just one efficient party. The ruling party is made up of communists and socialists therefore they understand the need and wants of the working class. One other strength of the political system of China is that the administration in China ensures that any project taken up by the government is completed in the minimum time possible. China’s political directives have also initiated and helped in nurturing the growth of technological advancements. These technological advances have made China the home land of the fastest super computers and largest hydroelectric dams. Everything in China has gone under reforms from rails to internet access (Wu, 2004). Evaluation of Economic Factors China is the world's second largest economy and the major exporter of the world. China is considered as the prime country for investment as its economic structure allows for development and growth. This growth in the economy of China has occurred as a result of mainly the economic reforms that were initiated in China in 1978. In the previous decade, the average GDP in China grew by 10.5 percent that is between years 2001 till year 2010. In the coming years, it is expected that the economy will continue to grow by 9.5 percent. China, economy grew at an unprecedented rate in the previous year and this growth was almost equal to the combined growth of all other G7 Countries (Walker. 2011). This success of China is greatly attributed to the fact that China is the best low cost producer of all kinds of goods, and especially electronic items. China is able to enjoy this advantage as a result of its cheap labor availability, its government policies that favor the manufacturing sector, its good infrastructure and its undervalued currency (Prybyla, 1977). China is the largest receiver of foreign direct investments (FDI) as revealed by the World Bank. China, offers about millions of employment opportunities every year making China's economy strong. The economy of China is also strong because it has foreign reserves of $1.2 trillion which supersedes the amount of foreign reserves of any country. Also China has been an active member of the world trade organization and can be rightly called the every country's favorite trade partner which accounts for the economic strength of China. Efficient monetary and fiscal policies by the ruling party of China have led to rapid and sustained expansion in China. Perhaps the real economic strength of China has been developed after the membership in WTO in 2001 and a sharp growth in exports and imports (Guthrie, 2012). Apart from all of this, the strength of China's economy comes from the fact that it has cheap labor and the country is made up of hard working people who strive and work hard for development. Businesses all over the world have opened up or considered opening up manufacturing units in the country. This is mainly due to the fact that cheap labor is readily available within the country. This is mainly due to the high population of the country. Here Ricardo’s theory of comparative advantage can be applied. China is a country that manufactures all kinds of products at cheap rates with all kinds of quality. By allowing this, China attracts foreign direct investment in the country as developed countries open up operating units in the country. These countries, including United States, through their research and development provide China with new technology. In this manner, both the countries benefit. China benefits by getting improved technology and US benefits through cheap production. An example of this is the company Apple that is headquartered in California. Apple outsources its production to China while providing China with the know-how of developing their latest gadgets. In this manner, Apple benefits with low manufacturing costs while China benefits through improved skills. However, this has negative implications of the people residing in the country, which include low per capita income of the individuals when compared to the rest of the world. Another weakness within the economy of China is that it is heavily reliant on exports only. Since China manufactures majority of the products available in the world, the exports of China make up the most amount of export within the country (Song and Woo, 2008). The disagreement between the central government and the regional and local government has also led to hindrance and corruption in China's economy. Also the economics statistics in China are collected annually and are not collected seasonally which means to make new reforms or rules, the economy has to wait for one year for the statistics (Congress of the United States Joint Economic Committee, 1997). This also means that the annual GPD of China may overstate or understate the growth and expansion periods of China. The economy of China also faces the risk of overvalued property prices, which means it is difficult for people to settle and construct homes and factories. The high economic growth of China has also resulted in the country suffering from increased inflation. Inflation within the country has led to severe increases in food prices and with labor prices already set at minimum wages, this creates a wide gap between the incomes of the rich and the poor within the country (BBC, 2008). Evaluation of Technological Factors After the economic liberalization in China, the government realized the need for scientific advancement in the country. Also the increased foreign investment in the country allowed for technology transfer within the country. China made great use of this and developed itself as a technologically advanced country. China was also able to invest into technology due to the four modernizations goals initiated by Zhou Enlai in 1963. According to these goals, Enlai attempted to strengthen its technology along with industry, national defense and agriculture in order to improve upon the economy of the country (Knight and Ding, 2012). China leads in almost all facets of technology. It is obvious from the fact that mostly all technology that one handles nowadays is made in China or has some part that is made in China. China is the largest electronic exporter along with the world’s largest mobile population. China is also a country obsessed with electronic and the internet. In 2010, China became the country with the fastest supercomputer with its Tianhe-1A that 262 tetrabytes of memory (Anon., n.d.). Despite the position of China as a computer leader and as a highest internet using computer, only 20 percent of the population owns a PC. Most people use internet in their workplaces or internet cafes due to the high cost of living in the country and the wide disparity between the rich and the poor. China has grown economically at a rapid rate, because the Chinese government allows foreign investors to easily set up operating units in the country. This is aided by the fact that China has been able to develop a strong manufacturing sector that produces goods at all types of quality and with the cheapest labor. What recommendations, i.e. future strategic direction, would you make for the economy (country) to sustain economic growth? Recommendations An evaluation of the political, economic and technological aspects of China suggests that China is still an emerging economy because it is yet to overcome the issues that are plaguing its citizens. Even though on a collective level, China is able to show a marked growth in GDP that increased despite the economic crisis, but then the aspects are evaluated under scrutiny it is obvious that the China has a number of short comings. Political Recommendations On the political front, the country needs a different ruling party. The Communist Party of China has been ruling the country for the past few decades and this has allowed too much control over the party. This party is bureaucratic in nature and imposes full control over all matters of the country. As China is developing into a potential superpower, it is time that the Communist Party gives over its rule to another less authoritative party. The working class needs to have more control over the country since they are the building blocks of the economy. It also needs to be understood that the Communist Party has been successful to a good extent to bring about the needed reforms in the country and also has been able to implement them. Therefore, the efforts of the Communist Party should be taken into account. It is not feasible at this time to completely overthrow the Communist Party since they have a great sense of direction for the company. However, their power needs to be controlled. This can be done by developing an affiliation between the Communist Party and the National People’s Congress to lead the country in a balanced manner. However, this seems a bleak chance given the strong position of the Communist Party and this greatly hampers the development of China to the next level. However, the government should consider reviewing its policies to take back some control over its industries (Barboza, 2012) Economic Recommendations In terms of economic development, China has been doing quite well. However, in order to further strengthen the economy and to satisfy all classes in the country, China needs to strive harder. The most pressing issue facing the Chinese economy at this point of time is the wide disparity between the rich and the poor. The rich are getting richer and the poor are getting poorer (Barboza, 2012). The government here should intervene on behalf of the labor class that has been working at minimum wages to attract more foreign investment that is ultimately going to benefit the rich class. The government needs to increase the level of minimum wage for the labor class and implement laws against paying employees lower than the minimum wage. The government also needs to keep a check on the rising inflation within the country. Even though agriculture forms a large part of the economy of the country, food prices in the country have been increasing to high levels. Inflation in the country can be controlled by two measures, namely monetary measures and fiscal measures. Monetary measures include limiting the amount of money available to the country thus preventing the rise of prices. Fiscal measures include increasing taxes, limiting public expenditure, and management of public debt (Dwivedi, 2010). Since China cannot control the amount of money available in the country on account of foreign investment, it will have to resort to fiscal measures. The government would have to increases taxes but make sure that the increase in tax does not ultimately trickle down to the labor class. Technological Recommendations China is one of the most technologically advanced countries but despite this, China needs to focus on certain aspects of its technology. This includes the usage of internet and PCs in the country. It is a sad fact that China is one of the most technologically advanced countries but only 20 percent of its population has PCs in their homes. Internet is usually accessed in the workplace or through internet cafes. The government here needs to ensure that the average user can easily afford a PC. Being the producers of PC at low cost, China can easily provide PCs to its population at low cost. They can even initiate programs where deserving candidates can get free PCs. Deserving candidates could be literate people having a computer background. This could include graphic designers for example who would use their PCs to get online freelance jobs through various websites that allow designers from all over the world to apply. This would further increase the GDP of the country. Another problem that arises in China in terms of technology relates with the over usage of internet. The Chinese people use internet for more entertainment purposes than for work. Internet is being used for all kinds of activities but productive activities with internet are limited. Productive activities on the internet need to be encouraged. This could be done by developing websites that combine fun with education, specifically for Chinese children. Furthermore, Facebook, one the most popular website in China is banned. Facebook is the most popular social networking website and allows users to gain useful information also. But the government has banned Facebook so as to prevent any discouraging comments against the government. This needs to be acted upon since Facebook allows increased connection both socially and officially. Conclusion In conclusion, it can be said that the government in China has too much power in its hands which prevents the country from fully exploring its potential. From economic interference to technological interference, the Chinese Communist Party is always present to impose its authority on the people. Even though China is no longer a strictly communist state but it is yet to embrace a democratic stance which would further increase its chances of becoming a super power in the near future. References Anon. (n.d) Facts about China: Technology, Internet & Media, China Mike, Retrieved from http://www.china-mike.com/facts-about-china/facts-technology-internet-media/ Barboza, D. (2012) A Call for Beijing to Loosen Its Grip on the Economic Reins, Retrieved from http://www.nytimes.com/2012/02/28/business/global/world-bank-calls-for-changes-in-chinese-economy.html?pagewanted=all&_r=0 BBC (2008) Steep rise in Chinese Food Price, Retrieved from http://news.bbc.co.uk/2/hi/7349896.stm Dwivedi, D. N. (2010) Macroeconomics, 3rd Edition, New York: Tata McGraw Hill Education Congress of the United States Joint Economic Committee. (1997). China's Economic Future: Challenges to U.S. Policy (Studies on Contemporary China) . New York: M E Sharpe Inc. Guthrie, D. (2012). China and Globalization: The Social, Economic and Political Transformation of Chinese Society (Global Realities). New York: Routledge. Knight, J. and Ding, S. (2012) China's Remarkable Economic Growth, UK: Oxford University Press LaFleur, R. (2003) China: A Global Studies Handbook, New York: ABC-CLIO Lardy, N. R. (2001). Integrating China into the Global Economy. Washington DC: Brookings Inst Press. Library of House of Commons. (2006). A Political and Economic Introduction to China. UK: House of Commons. Luo, Y. (2002) Multinational Enterprises in Emerging Markets, UK: Copenhagen Business School Press Prybyla, J. S. (1977). Some Economic Strengths and Weaknesses of the People's Republic of China. California: University of California. Song, L. and Woo, W. (2008) China's Dilemma: Economic Growth, the Environment and Climate Change, USA: ANU E Press Walker, A. (2011) Might China’s Economy Stumble, Retreived from http://www.bbc.co.uk/news/business-13802453 Wu, Y. (2004) China's Economic Growth: A Miracle With Chinese Characteristics, New York: Routledge Zhongqing Y. (2003). The political system of China, Beijing: China Intercontinental Press . Read More
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