CASE STUDY: INFLUENCE OF GLOVALISATION ON CHINA

Globalisation refers to the integration between countries and economies and the increased
impact of international trade influences on all aspects of life and economic activity. This
process has led to a great impact on the global economy but more profoundly in China, one of
the highest emerging economies, hence globalisation has facilitated strong economic growth
and development in China. China has made a rapid progress into higher economic growth and
development through the reforming of the country towards a market driven or capitalist
economy in orientation. Its increase in integration in the global economy is due to
international trade and foreign investment which led to a sustained increase per capita in
income, improvement in living standards and a reduction in poverty.
Economic growth: sustainability
Economic growth refers to the increase in real GDP in the economy.
The process of globalisation has had a profound impact on the levels of economic growth in
China. Economic growth refers to the increase in real GDP in the economy. After the
introduction of the Open Door Policy, China has experienced a steady stream of trade and
investment, leading to the high levels of economic growth. For almost 30 years, the Chinese
economy experienced an average economic growth rate of 9%, unheard of in any economys
history. The Global Financial Crisis of 2008 affected these levels, causing the growth rate to
drop down to 8.4%. This growth in trade and investment is primarily due to Chinas factor
endowments, which according to David Ricardos Principle of Comparative Advantage,
encourage trade with foreign countries due to their large population size.
From 19601978, GDP growth averaged 5.3%. There are claims that this is overstated due
to the Great Leap Forward (1958-1960) and Cultural Revolution (1966-1976)
Great Leap Forward attempt to modernise agriculture and industry, but failed to
raise national output significantly, resulting in widespread famine and poverty
Cultural Revolution attempt to revive communism; many schools closed and many
lost ability to be formally educated, affecting them for life and the quality of the
labour force
Between 2003 and 2009, China sustained an average annual rate of growth in real GDP of
10.1%
China has relied on foreign investment and international trade on the path to
industrialisation
China is the 7th largest economy in terms of nominal GDP and the 2nd largest economy in
GDP (PPP) behind the US
Chinas share of global GDP was estimated at 11.4% in 2008 and share of world exports of
good and services was 8.4% in 2008 and the share of world population was 20.1% in 2007.
The main drivers of the high rate of economic growth were business investment and net
exports.
In 2006, investment spending was 45% of GDP
Foreign investment funds (42% of GDP in 2007) are used to finance export
industries, allowing China to have a large CAS and a low external debt