China’s Role and Contribution to the Global Economy
Economists and editorialists often describe the rise of China as a case of a flourishing economy which is following an ascendant trend, preceded by Japan and the Asian "tigers" (Korea, Singapore, Taiwan, and Hong Kong) and that will be soon joined by India. The impact of China's continuing rise on the world countries-on both the developed and the developing countries - will be enormous, and so will be the need to find new strategies and reactions to the challenges created by China.
Taking into account the differential purchasing power, China is already the second largest economy in the world. Advancing at a pace greater than any other major nation China is on the track that could lead to overcoming the U.S. economy as the largest in the world within two decades.
In many industries, especially those based on physical labor, China is the dominant global player. Factories in the country produce 70% of toys in the world, 60% of bikes on the market, 60% of shoes and a third of travel bags. In this category, it is often impossible to find a product that is not produced in China. In other product categories like textiles and textiles industry activity, China's participation was lower due to trade barriers, which is expected to decrease over time due to China's WTO membership and expiry of international trade regimes. However, China is not content to remain a producer with poor technical features based on the intensive use of physical labor. China is already active in areas where technology plays an important role and labor is not the dominant factor in the cost of production. This country produces half of the microwave ovens sold in the world, one third of the TVs and air conditioners, a quarter of washing machines, a fifth of refrigerators; these products are part of its export segment with a higher rate of growth. Producers in other countries rely more heavily on components manufactured in China to remain competitive (Zeng, 2010, p. 154).
Unlike Japan and Korea, China will not renounce the use of labor while climbing in the rankings (Zeng, 2010, p. 91). Instead, it will use its dominance in labor-based industries and the average input technology to consolidate a strong entrance on the high technology-based areas that will influence future global economy. This combination will catapult China into leadership positions and will make this country important opponent in global competitiveness. With a foreign policy increasingly impressive, China can translate its economic power, into a stronger geo-strategic position that will counter the U.S. global hegemony. Meanwhile, like other nations, China uses its political power to achieve economic interests (Zhengzheng, 2008, p.2).
Factors that affected China’s position on the market
The resources that China brings in the economic struggle are often minimized and misunderstood. To say that it is a country with over 1.3 billion people has become a kind of cliché, until you count the huge implications of this figure. China is already the largest market for Boeing aircraft and American machines that produce tools while the automotive market is one of the most promising; China is already the highest external market for Volkswagen before the U.S. (Thun, 2006, p. 211).
China's size also means a vast fleet of human resources. This includes not only a virtually unlimited source of unskilled workers, but also a growing number of engineers, scientists, technicians, many of whom are engaged in research and development centers funded by the government, or technology centers developed by foreign multinational companies (Zeng, 2010, p. 24; Dahlman, Zeng and Wang, 2007, p. 80).
Foreign investments
One other issue that needs to be addressed when talking about China’s triggers on the world market is represented by the investments. The amounts invested by the Chinese government to stimulate and advance the country are huge, and with so many taxpayers, this is not surprising. There are, however, also many foreign investments. Attracted by the vast labor force and the huge market potential, foreign investors have pumped over 50 billion dollars a year here, 10 times more than in India. Huge amounts came also from Hong Kong and Taiwan; these are not foreign money in the true sense, but their impact is the same. This money was used for the erection of new factories, to rebuild cities and boost business. Moreover, labor has always been there, contributing to transforming money in real economic progress and profit (Foreign Affairs Bureau, 2000, p.30).
FDIs, exports, and domestic capital accumulation and/or the expanding domestic market have driven China’s economic dynamism. Foreign companies covered directly or indirectly, approximately 75% of Chinese exports. The largest sports shoes factory in China and in the world has Taiwanese managers, is funded by Goldman Sachs, and produces shoes for Adidas, Reebok, and Nike, under contract (Goldman Sachs, 2010, p. 47).
Inclusion in the WTO
China's accession to the WTO in 2001 imposed new policy changes to attract foreign investors. Because the laws of WTO are prohibiting tax discrimination between the foreign and national companies, the Chinese government has to reform the tax code in force, acting in two directions. The first is the unification of tax rates to 24%-27% for all companies, regardless of capital. The second refers to value added tax. Today this tax was dropped at 12% and is payable by all producing companies (Thun, 2006, p. 302).
An important role in Chinese economy is played by the free trade zones. China is a country whose coastline is valuing 18 000 km and has very rich resources. With the support of the Chinese government, the capitalist sector of the coast is now in the most favorable period of development (Zeng, 2010, p. 11).
Doubts over China come in waves every few years. However, every year, China has defied these critics and remained in the race, perpetuating the miracle of the Chinese growth, which seems to follow its course. If the main concerns right now are linked to inflation, excess investments, wage growth, and bad bank loans, experts warn that China could become victim of its own measures. There is still a kernel of truth to many of the current concerns, in particular on inflation.
References
Dahlman, C. J., Zeng, D. Z. and Wang, S. (2007) Enhancing China’s competitiveness through lifelong learning. Washington, D.C.: The International Bank for Reconstruction and Development.
Foreign Affairs Bureau (2000) Chinese Academy of Social Sciences. Economic management Beijing: Publishing House.
Goldman Sachs (2010) China: textile, apparel & footwear. New York: Goldman Sachs Group, Inc.
Ilan, A. and McIntyre, J. eds. (2008), The globalization of Chinese enterprises. New York: Palgrave McMillan.
Thun, E. (2006) Changing lanes in China: foreign direct investment, local government and auto sector development. Cambridge: Cambridge University Press.
Zeng, D. Z. (2010) Building engines for growth and competitiveness in China: experience with special economic zones and industrial clusters. Washington, D.C.: The World Bank
