Globalisation has strengthened growth via increased trade and as a result has created more jobs. This has allowed for the amount of people below the poverty line to reduce due to more employment opportunities and in turn, causing the HDI value to rise from 0.368 in 1980 to 0.663 in 2010.
- Unemployment
Unemployment in China has been classed as a major economic problem. This is due to the GFC causing the unemployment rate to rise from 4% in 2002 to 5% in 2009; however this does not take into account the estimated 10 million workers who were made redundant. Despite rising employment, the average rate of growth was close to 8% per annum. This is due to the Chinese economy ‘pump priming’ its economy.
Globalisation has boosted growth, resulting in more production and therefore more jobs. However, due to the Global Financial Crisis, some sectors suffered major structural unemployment causing the figures to rise.
- Environment
The Chinese Economy has experienced between 6% and 8% of increases in growth for the past two decades. This rapid rate of growth has led to higher consumption of resources and higher levels of environmental degradation. This has led to problems associated with resource depletion and will lead to resource allocation problems.
In 2006, China’s carbon dioxide emissions were 6,200 million tonnes. A report by the OECD found that up to 7% of China’s annual GDP is lost due to pollution and this figure could rise to 13% if environmentally sustainable practices aren’t adopted.
Globalisation has caused increased growth and production in China as well as increased trade. This resulted in increased resource usage, resource depletion problems and resource allocation issues. This has also increased negative externalities, for example: air pollution. This threatens human health and biodiversity by reducing air quality. A report by the OECD also found that as many as 300 million people in China are drinking contaminated water every day.
- Economic Growth
The Chinese Economy has achieved an average rate of annual growth of 10% between 2005 and 2008. This growth slowed to 9.2% in 2009 due to the GFC. The Chinese Government implemented a US$568b fiscal stimulus package in November 2008 to ensure the growth rate did not fall below 8%. China has begun to industrialise by driving growth through foreign investment and international trade. This has transformed the Chinese Economy in two main ways:
- China has moved from being a planned economy to a market economy.
- China has moved from being an agricultural economy to an industrialised economy; and a peasant based society to an urban based society.
This has driven China to become the fourth largest economy in the world as measured by nominal GDP ($US).
The influence of globalisation on China has kept the average economic growth rate between 8% and 10% between 1990 and 2010. The main factors of this sustained high rate of economic growth were business investment and net exports. Foreign investment funds are estimated to finance export industries (42% of GDP in 2007), which has allowed China to achieve a large current account surplus.
- External Stability
Due to globalisation, China has been able to accumulate a large current account surplus (5.7% of GDP in 2011) and a low net external debt (3.1% of GDP). It has also maintained large foreign currency reserves (US$3,353b in 2011) and is a net lender of capital to the rest of the world. China has been able to achieve greater external stability due to increased growth and trade.
- Distribution Of Income And Wealth
In 2010, China had a Gini Coefficient of 0.47 due to its high poverty levels. This result implies massive income inequality between the total population, and also suggests that there is a large proportion of people living in absolute poverty. Figure 1.2 below shows the distribution of income in China in 2000.
Figure 1.2 – Geographic Distribution of Income In China In 2000
Due to globalisation, the Gini Coefficient has lowered from 0.525 in 2000, to 0.47 in 2010. This suggests that the level of income inequality in China has lowered and the distribution of income and wages is moving toward a more equal level.
Section Two: Problems Caused By The GFC
China managed to sustain an average annual growth rate of approximately 10%. The GFC did slow down the rapid growth of the Chinese economy but only by a minor 0.8%. While this was a minor percentage loss, there were an estimated 10 million workers who were made redundant due to the lack of funds and partial collapse of industry sectors. This could also be linked to a lack of growth.
The effect of globalisation has worsened the impact of the GFC through many economies being affected by the other linked economies. However, due to the Chinese economy being a net lender to the rest of the world, it lessened the effects of the GFC and this was mainly due to globalisation.
Due to a fall in growth, there was a rise in unemployment levels. As previously mentioned, there was an estimated 10 million workers who were made redundant as a secondary effect of the GFC; the primary effect being a lack of growth and a lack of finance.
Conclusion
The Chinese economy’s shift from a planned economy to a market economy has strengthened its annual growth rate and this is largely dependent on the advantages of globalisation. The US$568b fiscal package developed by the Chinese government was largely effective on the economy with growth only declining 0.8%; however, there was an approximated 10 million workers who were made redundant throughout this period and this raised unemployment levels.
The Chinese economy is quickly becoming one of the largest producing economies in the world and has become a net lender to the entire world. This will be an advantage in years to come and with China having influence on the European economies; it would be interesting to see if China were to lend money to Italian economy as it did to the Australian economy during the GFC.
