Table of Contents
The World Trading System-500 3
The World Monetary System 5
The Business strategy of today’s European and US Based Global Corporation 6
China that has a population of 1.3 billion is the second largest economy in the world and it is increasingly progressing by playing a major role in the development of its economy by influencing the business sector in the global world. Since the crisis of 2008, it is the China that has consistently contributed in the global economy and is the largest one for it (Paul and Mas, 2016).
Since the reforms made in market in 1978, China has started to grab the grip in the economy from its centrally planned economy to its market based economy with a rapid social and economic development. The average GDP of the country has been nearly 10 percent every year. It has developed its economy as the fastest and sustained economy in the history of economy. The growing economy of the country has helped in lifting 800 million people out if the poverty. China has reached all its Millennium Developed Goals (MDG’s) by the year 2015 and has made a major contribution in the achievement of MDGs globally (Union, 2014).
By the end of 2020, it will be seen a great shift in the economic worldwide power balance. The emerging market economy will be the most forceful factor that will make China to be at top as the World’s largest economy in the world with its Gross Domestic Product. As of 2015, the largest economies in the world are United States, China, Japan, Germany, United Kingdom, France, India, Brazil, Italy and Russia in terms of top economies in the world. The importance of rising emerging market economy in the year 2020, will bring a major implication in the allocation of consumption, environmental resources, investments of the world.
The World Trading System
The reality can be seen in the form of sheer force that China has in the world economy. During last decade, the output was expanding with an average of 10 percent on a year basis, while in term of merchandise export it has been a growing faster with a pace of about 15 percent. In the last two decades the value of China’s merchandise export has increased which is more than twenty-fold with US $151 billion in the recent year. As of now, China is the World’s 5th largest trading power in the world and the second biggest recipient of all foreign investment
The Impact of current trend of China on Global trend in the following ways-
The ageing population of China in the integrated world, similar to other developed world, outward migration, and urbanization will have a biggest impact on global economic growth patterns. China has the same child policy as the other developed nations have. The ageing population of China will pose a big question on world savings, interest rates, behaviors of government saving. The current high saving rate of China points towards the saving fo retirement in China. The key questions is how the retired Chinese will be spending their savings after retirement or, not (Nejat et al., 2015).
Urbanization of China is one of the biggest issue that will have impact in 2020 in shaping it. It is expected that by the end of 2020, 50 to 60 percent Chinese people will be living in urban area and their settings. The rapid urbanization and increasing income will be changing the lifestyle of Chinese and they will have preferences over food, diversities in the dietary system, that will make an impact in the commodity trade. Thus, this increasing trend will be more focused towards the processed and high valued food stuffs (Hoge , 2015).
The speed and sheer scale of urbanization process of China will be accentuating the trends of global demographics by creating a pressure for required space and in terms of quality of life to live. This will help China in exporting migrants who will be either permanent or, temporary.
In the Asian economies, it can be seen that there is increased participation of workforce that help driving the economic growth but nit the productivity. In China low participation rates and presence of abundant workers mean that the economic growth of the country is likely sustained in a long term as it will be the rural worker absorbed in the industry. This factor is highly suggesting that high growth rate may continue for a long time before China feels the shortage of Labor (Lo, 2014).
Technology & Resources
China is the major user of technology and resources. China’s entry in world market has already a considerable impact. How the current trend will have impact on global trend relies on its characteristics of market, ability to sustain and the technological development.
Chinese young has very high aspirations. They do not believe in reversing the technology or, in simply making a producer they want. Chinese believe in deepening in terms of high technology and their capabilities; widening its low to high capabilities in Technology. It means, the Chinese are highly skilled competitive in manufacturing, they are deepening and advancing their skill to stay at top.
In terms of resources, as the price of commodity rises, the government is focusing on securing the supply of raw material needed to the industry. China is an extensive consumer of raw materials and energy. As of now, it consumes 8% of oil, 28% of coal, 25% of copper, 35% of iron ore of all available resources while a major importer of Bauxite for the production of aluminum and the relevant materials.
As the prices of these commodity rises, there is potential that in the coming year the net importing countries will have a negative trade effect. In long run, the producing countries suffers when the prices fall for the related commodity.
The World Monetary System
The current growth prospect of China where Beijing is hoped to deliver an annual growth increased rate of 6% annual growth by 2020 provided everything goes well.
2020 Outlook: the baseline expectation in terms of GDP growth is seen 6% by 2020. It is estimated that the ambitious growth of China the program of economic reform is implemented. The recent estimates done from the Chinese leadership and the International Monetary Fund are around 6% of growth by 2020 (Lee, 2014).
In current time, where it can be seen big turmoil in terms of currency, economic transformation of China can create a room for currency winner in 2020. China’s renminbi can replace the US dollar in 2020 by replacing the faulty and inefficient functioning monetary body, IMF. IN February 2017, when the referendum of UK’s membership of European Union was announced, the sterling was seen with a fall of 14 percent against currency manipulating US dollar. Again when in October, the government of United Kingdom announced for a break from European Union a fall of 6 per cent was gain seen in sterling.
A currency reflects the geo political dynamics with pattern of trade along with debt of a country. A weak currency cannot help an economy where the import is more than the exports done . The renminbi will be a milestone for china’s per the report of International Monetary Fund. Te inclusion of renminbi recognizes that Chin’s monetary and related authority have worked hard to push the transformation of renminbi to make it an international currency; the currency that will be used to deal in trade settling the due the balances and other international trade capital.
China move to replace its existing currency with renminbi will help in dealing renminbi instead of dollars. The Chinese trade is expected to be 30% of the total trade by the end of 2020 s pr the research of standard chartered. This will also project the growth with $US 3 trillion. This will have an implication to US monetary system that boasts as the dollar is global reserved currency. If the Chinese renminbi converts into reserve currency, it will have numerous advantages. Hit on targeted GDP of 7.5% this year brings a political sensitivity that Chinese officials have little time to discuss on it (Huang, 2016).
The world has seen a negative influence of International Monetary System of United States so far. As of now, Chinese renminbi is restricted in dealing in trade that may push it to replace while in the trading. The reserved currency of US that acts as the denominator in valuing the economy of a country may get replace with the fastest economy growth of China by 2020. If renminbi becomes able to replace dollar, the international monetary system of United States will have less control on world economy. Instead of taking loan from it, the developing country will move towards China and it may be that a new system may come in to effect to replace International Monetary Fund similar to it.
The Business strategy of today’s European and US Based Global Corporation
China’s fastest economic growth and economic power has already provided China to get the leadership confidence in the economic model. The key challenge for United States is to convince China that its economic rise may put Dollar at risk as it reserve currency in global trade. China is already on the way to make a reform in its global trade system dealing by introducing its international currency renminbi. China’s strategy to boost the domestic spending and importing more at international level would push its currency renminbi so that it could get accepted as it would help in recovering fast to the developing country involved in the international dealing with China. China has been pushing its currency over the last five years in making it the reserve currency in international trade dealing. So far, the currency has not been accepted in the international market as US Dollar has not allowed it on the ground of United States based International Monetary Fund. The sterling of United Kingdom has already seen decline in the last few years and majorly at the time of announcement of BREXIT. Euro has been the currency among the European Union in dealing in international trade but the developing country who import more from China gives advantage to China in international market in grabbing the share overall. Chinese economy that has the potential to boost the economy of developing country by importing more from them can put Dollar and Sterling with Euro ate stake. Renminbi may get pushed automatically if the import of China increases further in future by 2020.
The current business strategy is monopolized by the European Union in international trade as it is backed by US Dollar, Sterling and Euro in international trade. By the end of 2020, when China will emerge as the top economy of the world, it will have power to manipulate the international market where instead of Dollar the trade dealing may replace Dollar by its international currency renminbi(Willer and Lernoud, 2016). The already introduced currency, further, may replace by establishing a similar institution like World Bank, International monetary fund. Global Business strategy has always been a study subject due to its interdisciplinary issues related to marketing, business strategy, organization theory, and in international management where the concentration is made on maximizing the performance of firms in international market.
The current trend of Chinese economic growth is a high risk to the world economy. The spreading merchandise export of products to the world with comparatively low price, the highly competitive skill that cats as the threat to the world technology, the use resources and import of essential resources done by China is posing a high risk to world economy. No doubt, hina will lead the economy by 2020, meanwhile the changes that it will bring will affect the major developed countries such as United Kingdom, United States and their respective currency which are sterling and Dollar. Sterling has already seen a decline after the announcement of BREXIT by UK whereas the denominating US dollar may get threat from Chinese renminbi which is under restriction in global trade so far but it is heavily backed by China to make it a global currency in trade dealing. International Monetary Fund may see a similar institution in coming years as the institution has been inefficient in dealing with world economy growth issues (Jotzo and Löschel, 2014).
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