Discuss about the Contributions of Agriculture to Employment.
Globalization constructs a world market where price efficiency can be outstretched. Almost every country is someway influenced by globalization. Globalization however, has an positive impact on China because as its condition prevails it has the most lower cost labour facilities as well as the manufacturing costs are also much lower. Therefore, China gets attracted by the global investors and with their help China has lowered its poverty. China is ruled by communal government but then also they are following western outlook as their policy to expand their economic growth by enhancing a well planner of globalization. The role that is played by Globalization in the present world is huge. However, China who entered the wto few years back go immensely benefited by it but Globalization has both negative as well as a positive effect that no one can ignore. Therefore, Globalization is an essential component that is necessary for any nation to prosper as well as develop. This study is focussed on identifying in detail the impact of globalisation on China. The impact will be related to the current changes as well as the future changes. The study also recommends two industries, which a UK client can utilise to enter into China. Those two industries are automobile manufacturing and beef agricultural industries. This further justifies the recommended industries. Moreover, the paper also recommends an appropriate entry mode in China with suitable justification too.
Foreign Direct Investment and trade are the two important factors that have contributed largely in such a transition in the country. The rapid growth in terms of biggest exporting country and the largest secondary economy has become possible because of foreign direct investment. The process of reforms that has started in the late 1970s has helped China developing its economy and human resource. The strategy to represent it as an open economy to the global world has helped in attracting various international markets. Investments and international trades have been the biggest assets in the rising industrialisation in China. Consequently, the country has continually maintained a uniform growth rate in GDP. The export oriented strategy of the country was largely financed by direct foreign investments. The growth in GDP can be understood with the help of data submitted by the World Bank national accounts data and OECD National Accounts data files (Holz 2014).
There has been a significant transition in the different industrial regions in China. The agricultural economy of the country did transform into an industrialised economy. The rural based society did transform into an urban based society. The country has actually carried on reaping the benefits of globalisation. The expansion is enlarged now due to a reduced barrier into foreign countries. However, there are still barriers from some international companies especially from the United States. America has been in continuous threat ever since 1972. They have tried to sharpen their policy against China. This is for a reason that trade policies of China have kept on frustrating the United States (Bader 2017).
China strategically plays a significant role by following the Western model of approach to develop their economic growth. In the year 2001 in September, China joined the prestigious World Trade Organization (Shambigh 2013).
Globalization has brought many changes and influences on China and they are:-
Many developed countries have been positively benefitted from globalisation. Globalisation has influenced human capital and technology positively in those few countries. However, on the other hand, developing countries rely hugely on the foreign direct investment to get benefitted from globalisation. China is one of those, which is highly benefitted from an incrementing foreign direct investment (Shambigh 2013).
As per IMF, it was believed that China would overtake the United States in terms of highest purchasing power parity (ppp) in the year 2016. Throughout the decades, it has made extensive investment in amplifying the capabilities to build economic links with many countries. It has been seen as an overseas partner as well as the investor (Martel 2016). The following diagram would show how China is being forecasted to overtake United States as the world’s dominant economic power by the year 2030 based on the share of international GDP exports and trade (Morrison 2014).
One of the important developments is the One Belt One Road initiative along with its two pillars and the 21st century Maritime Silk Road and Silk Road Economic Belt (You 2016). This developmental project of OBOR incorporates a territory, which is equal to 56% of the international GDP, 71% of the population and 75% of the energy reserves. One building block one Belt one Road, which is also known by the name OBOR is known as Regional Comprehensive Economic Partnership (RCEP). The driven alliance of China would constitute New Zealand, Australia, China, Japan, South Korea as well as the region of ASEAN. The below diagram would make the concept clear about the growing silk route of China (You 2016).
China has moved to Africa and has invested in many big projects (Summers 2016). One of the important projects is the Standard Railway Gauge in Kenya. There are also the developments like the deepwater ports in the cities of Kenya. They in future are likely to transform into industrial hubs, by following the eye-catching developmental model of China.
Till the year 2017 in terms of the development of Industrial sector which comprise of outflow, inflow, tertiary and
China has expanded by incorporating itself in the international economy if their international growth is considered. China is gradually reinforcing its global position among the other countries of the world. Today, China is not only regarded as the second largest economy but also as the emerging powerful international economy at the intercontinental level (Coase and Wang 2016).
The membership of China in WTO has given China the valuable opportunity to liberalize their regime in order to integrate in the world economy and in the reign of globalization. It has offered China a pleasant environmental business situation for the foreign trade investments as it is confirmed by the regulations of WTO. This has made things possible to reduce the level of corruption in the system of politics, which magnifies its index and helps China to rise up in the ranks by becoming more attractive to the investors and traders. By keeping these important trends in mind, it is important to analyze the agricultural and manufacturing sectors of China and how they are being affected by globalization (Coase and Wang 2016).
The current meeting, which took place in Xiamen, is regarded as a sign of growing rapprochement between the two important players, India and China. The meeting was preceded by an immediate diplomatic resolution to the current crisis at Doklam. From this BRICS summit the fact is lucid that China still gives importance to its values to the BRICS summit by being a diplomatic forum (Armijo and Roberts 2014). Indeed, in this era of globalisation, China has solidified its position as an important protagonist as both Brazil and Russia are dependent on the commodity boom of China. Therefore the real quandary is always being India. The staggering growth of GDP that China has achieved over many years is yet to register the results of the investments and if those investments generate few or no return, the write- downs of the consequent stages would weigh down on the GDP figures of China for the coming years. India, however, on the other hand, has registered a higher growth rate last year than China. The country is having a greater deal of catching up growth and unlike China; India is having a government that has the appetite to introduce beneficial reforms in structure, which would act as an important drive for the future growth rather than investment made out of debt fuelled exports and investments. Therefore, from here, it can be stated that India is gradually coming up in the global competitive business market.
The Government of China is working hard to foster its automotive and agricultural industry. In this respect, in order to enhance the profit of their market, the government is welcoming other industries to invest in their market. Initially, China attracted many international companies to do business in their country like Nike which is an American based company but has a powerful sale base in China and this has further resulted in the rapid increase of foreign investments in the market sectors (Li et al 2017; Zafrahullah and Haque 2017). The automotive industry of China has provided livelihood opportunities to the civilians of their country and on the other hand, the agricultural industry has benefited from the export of products to Canada, USA and Britain. Therefore, by keeping in mind the important trends, it is important to further justify the industries of United States, who are planning to enter China. However, the country has to face strict legal restrictions in the context of their industry. The legal instruction has become an effective part of the globalization and accordingly, by keeping the trend of globalization in mind, there are as well certain opportunities and challenges, in this respect, which the country has to face (Li et al 2017).
China, however, as an international economic leader has miraculously modified its economy from a primarily agricultural one which was mainly closed to global trade to an industry oriented one with vital banking and private zones. Therefore, China at present is in the top of the charts of the countries for those who want to enlarge and invest globally. Moreover, for many the cultural differences might appear difficult to enter the industry in china and conduct business but it can easily be turned into a competitive advantage. China is the largest appearing market economy in terms of both population as well as overall economic productivity. China is arguably the most important manufacturer and industrial producer in the world, which alone can account for more than 40% of the gross domestic products as well as GDP of china (Fioramonti 2013). Moreover, china is also among the largest exporter and second largest importer in the world, including the consumer markets that are rapidly expanding. Therefore, the important industries in china comprise manufacturing, agricultural and telecommunication services.
Automobile manufacturing industries in the foreign countries has an increase in their prices, giving pressure to their labours to learn new skills and reduction in the different goods offered (Ruigrok and Van Tulder 2013). It has been seen that the labour cost in china is way cheaper than in any of the foreign countries and they are even more skilled and trained professionals. The foreign multinationals those who want to enter China are mainly because maximum labours in the foreign countries are not trained in the skills that are necessary to effectively produce ample quantities of products. China and Mexico has the maximum number of qualified labours that are way more trained and specialized for a manufacturing industry. However, in many countries the number of factories is limited and staffs are not that much specialized in the diverse techniques that are important to manufacture their goods (Egilmez, Kucukvar and Tatari 2013).
Agricultural industry plays a major role in maximum places because it is a net food exporter. However, there is pursuing decrease of small family firms in the foreign countries because the people who are working in these industries are mainly cut in half as large companies are mainly dominating the agriculture of those countries. Commercial fishing has been seen to have reduced in many countries for the last 30years (Mallory and Panel 2012). However, China and India stands in a much better condition when it comes to manufacturing food in comparison to any other foreign country. China has a larger workforce which is an advantage for them to produce high agricultural products (Vergati and Sumner 2012).
The biggest manufacturing industries in the foreign countries by revenue involves the petroleum, steel, automobiles, mining, lumber, food processing, consumer goods, electronics, chemicals, aerospace and telecommunications. In the recent years there has been an increase in the dispute about the industrial productions in many countries for which foreign multinationals can avail the opportunities that China is providing them. China has an edge with it in terms of skilled labours and the labour cost. It has the cheapest labour cost in the world (Ceglowski and Golub 2012). Additionally, the labours are skilled, which is very rare with the United States. On the other hand, China is a beneficial place for the manufacturing industries as well. It is because of various reasons such as the low labour cost in the country. This is really understandable that if a country is offering skilled labours and on a comparatively lower cost, this will simply attract foreign investors specially the automobile manufacturing as well as agricultural industries to grab the opportunities that China is offering to them. This is exactly what is happening. This was a direct benefit of globalisation that China has witnessed. It has attracted so many foreign investments mainly from the automobile and beef manufacturing industries. However, foreign countries need to be cautious of the legal policies, which are somehow very resistive to foreign companies especially to an American company (Egilmez, Kucukvar and Tatari 2013).
The above graph clearly shows the inflows of foreign direct investment in China has kept on increasing year after year. The graph indeed support the fact that foreign direct investors are getting attracted to the country for many reason such as low labour cost and skilled labours.
Agricultural industry is very flourishing in the country as it is an ultimate food exporter to the different parts of world. However, there is pursuing decrease of small family firms in the foreign countries because the people who are working in these industries are decreasing as large companies are dominating the agriculture in some countries. Commercial fishing has been seen to have reduced in many countries for the last 30years. However, China and India stands in a much better condition when it comes to manufacturing food in comparison to any other foreign country. China has a larger workforce which is an advantage for them to produce high agricultural products (Vergati and Sumner 2012). As stated by the National Bureau of statistics they have stated that in China the working age population fell in around 2011 for which the people who are of age 15-64 years represent almost 74.5%. If the statistics are to be considered then that also includes few stories wondering about the end of cheap labour in China.
The increase in international business has made China the most attractive location in the world thereby improving its legal system. However, the foreigner multinational companies who have never exported their products in China want to establish their business there because of three important factors which are the wider size of the market, low cost of labour and the growth potential in China. Therefore through PESTLE analysis the macro environment can be analyzed for the growing industry’s success in China.
The opportunities that China’s automobile industry has are its entry to the world trade organization, positive effect of globalization in China followed by exposure of international R&D centres prevailing in China (Ash and Holbig 2013). However, China further has important market shares in many products along with its competitive workforce and also there is opportunities for the companies to get unite internationally. This automobile manufacturing industry in China has certain strengths which are also equally important for the foreign multinationals to get their business successful. However, the strengths are that China has huge number of highly skilled and trained workers along with diverse resources and market. China also has its share from the previous planned economy. It further has large number of SMEs (small-medium enterprises) along with entrepreneurships. China has been the largest automobile manufacturing country in the market since 2009. However, in 2016 the statistics says that the production of annual vehicle in China deemed for almost 30 percent of the production of vehicle worldwide that actually exceeded the European Union or the combined number of US and Japan.
China has previously attracted many international companies like Volkswagen and Ford who are totally foreign based automobile companies to establish their brands in in their country. However, the foreign brands were only permitted to supply their vehicles in China by initiating a joint venture with the domestic manufacturers of automobiles in that country. Presently, due to technical advancements and cheaper cost of productions it has been seen that several native brands of China that are among the leading manufacturers of automobiles have acquired more success in the manufacturing industry (Gong, Wang and Wang 2013). However, China is also found to be promoting the new energy vehicle sales for which it has introduced different measures as tax exclusion, allowances for car purchases along with their need for government departments to purchase more energy cars so that they can save energy as well as decrease air pollution New energy vehicle manufacturers also get a financial support by the government so that the R&D and the cost of production can be decreased. Thus, due to the China’s continuous growing economy it has been seen that China has opened its doors to the foreign multinationals to get rewarded keeping aside their challenges in doing business with China.
The agricultural industry in China have various cattle breeds that can be divided into three broad categories as per China’s production orientation, geographical region and genetic characteristics where they are prevailing yellow cattle, yak and buffalo. Thus, this is among the advantages that beef agricultural industry has for the foreign multinationals. China has taken up the beef improvement work to enlarge the productivity of yellow cattle. China further took up an improvement plan since 2015 till 2025 where their existing foreign breed cattle are qualified, that is more than sufficient to attain the demands of the national-wide breed advancement in a national group possessing more than 113 million animals (Zhou, Liu and Cao 2014). China has been the rapidly growing beef importer in the world. Domestic beef consumption in China has vastly improved because of the development in the China’s economy in the recent few years. (Yao 2016). The graph below is clearly showing the production as well as consumption of beef in china.
The beef consumptions by the Chinese population grows every year and beef products are very much in demand among the Chinese people specially for the middle class people who are in a continuous process of expansion (Carter, Zhong and Zhu 2012). In between the years 2003 to 2016, Chinese beef importations have reflected this increased demand of beef agricultural products in China. It is expected that the total consumption will reach up to 5.34 billion kilograms in China in the upcoming years (Guenther 2014). According to the reports of the NGO wild Aid, China has already consumed half of the world’s beef by 2013 for which the importations from Brazil, Australia and Canada have seemed to be inadequate to meet the high demands of the Chinese markets (Carpenter and Song 2016). China had beef ban from the American markets due to the mad cow disease. However, recently US beef is making a comeback in Chinese markets that is consuming 28% of the meat supplies of the world. Apart from the supply problems the production that is of domestic beef meat in China is increasing slowly but it alone cannot meet the demand of its population and so it is opening opportunities for the foreign market entry (Leipnik, Su and Ye 2014).
In terms of the marketing strategy, there are rules and regulations, which are important for the company to follow, and they are as follows:
Identify the market of China: The first realization that the foreign company needs to understand that China is not a homogenous or uniform market. However, China is being unified under the umbrella of geo politics, economically and socially which is quite fragmented (Maseiro et al 2017). By keeping this in mind, the foreign multinationals must think carefully about which geographical location they want to select for expanding their business in China.
Select the location: The foreign companies need to select the industry wisely. The foreign companies always made a focus on the Tier 1 cities of China, which is quite highly populated, with high-income people. These tier 1 cities are the mature markets of China in terms of the behaviour of the consumer and typically the examined ground for the foreign company to establish (Maseiro et al 2017).
Regulations and policies of Government: The foreign companies’ need to keep in mind, along with the increasing effect of globalization that the government of China has restricted many foreign companies from getting involved in the field of energy, telecommunication and petrochemical industries. The US Companies must maintain the foreign regulations and consult the foreign investment catalogue of China before investing in their markets (Liberman et al. 2017).
Hire staff: The quality of the Human resources which are available are needed to be closely tied with the quality of people who are available in the China’s one tier cities such as Beijing, Shanghai than two and three tiers.
Conclusion
To conclude, it can be stated that the recommended industries such as the Automobile and manufacturing industry and the beef agricultural industry can prove to be potential choices for clients from the United States. This can be for many reasons; however, the low labour cost and the relatively skilled labours seem to be the two dominating factors. On the other hand, foreign direct investors can face some challenges as well especially from the legal policies and the local government’s perception on few foreign investors. The local government is stricter to the clients from the United States. Additionally, the local government of China prefers fostering the local companies, which has always remained a threat to the international companies operating in the country. It simply supports a fact that a foreign investor should analyse the entire challenging circumstances in China before they think to make relationships with the country.
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