Imports were up 40.5%
Tourism is an increasing industry, which is up 9.7%
In the last decade globalization and the entry into the WTO has made China a more attractive country to invest and travel to, along with this and also their quick response to the rest of the worlds interest in China they have managed to turn around in less than ten years a CAD into a CAS.
These trade flows are very positive in relation to China with the second biggest trading nation in the world.
DISTRIBUTION OF INCOME
A main indicator to measure the income inequality is to use the Gini coefficient method as in 1990 the level was as 0.25 and then calculated in 2005 the level has risen to a level of 0.447. This is the comparison to Australia's Gini co-efficient index that now stands at the rate of 0.294 [2003-2004]. This increasing gap of income inequality is becoming more one of the extremes-causing economic and social imbalances.
FOREIGN DIRECT INVESTMENTS AND TRANSNATIONAL CORPORATIONS
FDI and TNC's have increased rapidly since globalization and the opening of markets and deregulation by the Chinese economy. The FDI has increased by 19% since 2002. Some statistics and developments concerning the development in TNCs and FDI include:
In 2003 some 34 000 new FDI projects and enterprises were approves.
FDI and TNCs encouraged in modern agriculture, in high tech industries, infrastructure and construction.
Focus is on the development of the western regions, and the re-engineering of State Owned Enterprises.
Foreign investment capital became a major factor in growth, with US$30 million of investment in 1994. This rapid growth has caused some problems, such as high inflation rates in urban areas and increasing economic inequalities between regions and social groups.
ENVIRONMENTAL ISSUES
There is concern that China may pursue unsustainable practices in an attempt to maximize opportunities of globalization. China perhaps has become too absorbed in becoming the fastest growing economy with such high growth, development, and HDI levels that environmental issues are not seen as being so important and the issue is just being ignored.
The air pollution in South East Asia is a particular problem with almost five times more pollution in the air than some parts of Sydney's pollution. These environmental problems occur due to the increasing industrial production contributing to poor environmental quality and increasingly frequent blackouts. With their increased use of oil used in production of such industries the rest of the world can feel the impact on the increase on a barrel of oil due to the demand created by China's increased consumption.
STRATEGIES USED TO PROMOTE GROWTH AND DEVELOPMENT:
OPEN TO THE WORLD POLICY
In general China has adopted a more open policy that is in keeping with the WTO stance on trade liberalization.
China continues to actively seek FDI and develop links with the international economy.
FDI AND TRADE POLICY
- Sustained economic growth rests with continued investment and trade.
- China actively seeks FDI and will continue to do so.
- Removal of some 120 regulations that limit private capital inflow
- China's export base is being broadened.
- Businesses are being encouraged to invest and compete for foreign contracts
- Key equipment and technologies are being imported to develop domestic industries.
- The liberalization had a fairly significant impact with the removal of government controls over prices, reduction of trade protection and also with the liberalization of investment and financial flows.
MICROECONOMIC REFORM
- China is committed to the reduction of administrative intervention
- The financial system is being reformed and to some extent deregulated.
- Consumer credit developing.
- Continued reform of SOE's.
FISCAL POLICY
- Much of the government expenditure is directed towards infrastructure economic redevelopment and job creation.
- Spending on education and health is increasing.
- State is committed to an active role in stimulated the economy through fiscal policy.
- In 2005 the fiscal revenue soared 18.2 % or more than 50 billion US$ for the first 10 months.
WELFARE POLICIES
The immature welfare system must be developed to address rising unemployment.
Income protection insurance schemes being proposed for rural areas.
Job creation is important to addressing welfare problems of the economically disadvantages regions. As stated before, China is paying out welfare payments to over 1.3 million unemployment benefits. Will careful and accurate restructuring of the Chinese economy not so much payouts would be required thus a high budget to spend on other things.
The current position that China is in [as quoted by the “Gittins on Saturday” article by Ross Gittens in the Sydney Morning Herald, weekend edition on the 3rd of December 2005.] is a transition from industrial to knowledge-based development. “Since 1949, rural China has for the most part broken free from economic isolation thanks to investments in basic infrastructure, development of a road system, basic disease control, lower fertility rates, increasing literacy and so on.” He also mentions how China has moved to a more market based economy due to the globalization and China being more opened up to the world market.
Deflation Looms: These extracts come from William Pesek Jr.
Officials in Beijing have used administrative measures to reduce over investment. Doing it slowly to achieve a soft landing means capacity growth remains high, causing an oversupply even when China's annual growth of more than 9 per cent slows.
Cutting the interest rates may even worsen deflationary pressure by encouraging capacity growth regardless of corporate profitability; the plentiful liquidity keeps interest rates low and, hence sustains the on-going investment projects and funds new investments in bottleneck areas.
Pushing China toward deflation is a high savings rate. While Americans save too little, Chinese save too much.
China needs to get consumers to spend more. To do that, the government should privatize state owned assets, shift fiscal expenditures away from investment and modernize pension, health-care and education systems.
The impact of globalization on the economic performance on China has proved to be a positive one as summarized throughout this essay. Globalization has created positives in the Human Development Index, there is more literacy and a longer life span as well as higher incomes and less and less people coming out of absolute poverty each year. China are not just benefiting themselves by becoming a more market based economy but they are also creating positives through the rest of the world by selling their comparative advantage of cheap labor to many transnational corporations and Foreign Direct Investors.
Although that they do have had an enormous positive out of globalization they also had negative in pollution levels and the income inequality. Although these are not what an economy is looking for the fact is that the positives that China has experienced outweighs the negatives a thousand to one.
As stated throughout the essay China has embraced globalization with open arms and uses many strategies to help the impacts that globalization has to offer which included their entry into the World Trade Organization, their active role in NAFTA, deregulation in many industries, privatization of many government owned organizations and the reduction of tariffs by almost 35% since 1980.
