Assignment #1 China is playing a growing role in the world economy. It is one of the world's fastest growing countries and is the tenth largest exporter. Today, it is the world's second-largest economy and produces 9.3 percent of global GDP. If current trends continue, discuss the possible implications of such a development for: 1. the world trading system; - China's rise as an economic and financial powerhouse has been much faster than many predicted. China's rise has been rapid and highly disruptive, whether in terms of technological advances, industrial development, global trade, or participation in capital markets. As China's integration into the global economic system increased, so did its use of coercive measures to further its strategic interests. Gaining membership in the World Trade Organization (WTO) in 2001 facilitated its emergence as the hub of a global production network, receiving parts and components primarily from the Northeast Asian economies of Japan, South Korea, and Taiwan – accounting for 40% of total Chinese imports at the time – and processing for re-export to the United States and Europe. East Asia's economic prominence increased as China became the world's assembly plant. However, China's growing presence in Latin America and Africa boosted growth, but it also raised concerns about exploitation, over-reliance on Chinese labor, and debt traps. 2. the world monetary system - One notable omission from China’s overall picture of strength is the country's currency's internationalization, which has been much slower than anticipated. The International Monetary Fund's conclusion that the yuan was comparable to the dollar, euro, yen, and pound seemed to mark the peak of China's expected rewriting of the world's financial system following the 2008 global financial crisis. However, despite various measures, such as improving foreign access to its onshore equity and debt markets, there has been little evidence of a concerted effort to push for its broader global adoption since then. However, there is growing evidence that China is planning a second push to promote yuan adoption around the world. However, China's reintroduction of yuan internationalization will result in the establishment of two parallel financial systems. Many financial institutions will face significant challenges as they attempt to navigate this divergence. It will also be a struggle for countries attempting to maintain equivalence and relationships with the central powers. Both banks and governments will be caught between a rock and a hard place, and both should start thinking about the difficult decisions they may have to make. 3. the business strategy of today's European and U.S. global corporations; and - Despite tensions over China's discriminatory business practices, the country's trade continues to grow, and it has surpassed the United States as the top foreign investment destination. Even in the midst of a trade war between China and the United States, American and European businesses continue to invest in China's large and growing market. China’s strategies unavoidably steps on the strategies of western corporations for they could easily force them into joint ventures. Uncertainty and inconsistency in the application of regulations, as well as uneven law enforcement, are major concerns for EU companies operating in China, while it is the top concern for US companies. Unfortunately, the available international comparison studies only provide proximate information and do not provide a direct measure of regulatory discrimination and uncertainty. 4. global commodity prices - Chinese policymakers have been attempting to contain rising commodity prices, ranging from coal to copper, which have squeezed manufacturers' margins in the world's second largest economy. There’s nothing best for Chinese business people than cheap commodities. References: Dadush, U. and P. Weil (2021) ‘How difficult is China’s business environment for European and American companies? ‘, Policy Contribution 12/2021, Bruegel Patton, D. (2021). China flags new rules for commodity price indexes from August. Retrieved 17 February 2022, from https://www.reuters.com/world/china/china-bring-new-rules-commodity-price-indexesaugust-2021-06-17/ Bratton, W. (2021). China reboots the internationalization of its currency. Retrieved 17 February 2022, from https://asia.nikkei.com/Opinion/China-reboots-the-internationalization-of-its-currency Huang, Y., & Smith, J. (2020). How China and the US Threaten the World Trading System. Retrieved 17 February 2022, from https://thediplomat.com/2020/11/how-china-and-the-us-threaten-the-worldtrading-system/
