CKGSB website

CKGSB Knowledge

Globalization and China Doesn’t Stop Here

by Zhou Li

December 14, 2016

Globalization and China, a commentary

On April 15, 1981, some 500 Chinese officials and Americans gathered in the Great Hall of the People in Beijing to celebrate the opening of the Coca-Cola Company’s first mainland bottling plant since 1949. It was still the early days of Deng Xiaoping’s reform and opening process, and the international community was eager to have China participate in the new trend of “globalization.” “[This] may be one of the most important days… in the history of the world,” said Roberto C. Goizueta, then the chairman of Coca Cola.

Today, Coke is as popular in China as anywhere, but the international mood has to a great extent shifted. The deeply-held views on free trade and open access for all, which are at the heart of the globalization trend of recent decades, have been joined by ever-more insistent drum beats of dissent. From Europe and North America particularly, but from other places as well, there are calls for a rollback, for trade restrictions, for sanctions and barriers. There are those in the West who believe that to protect jobs and industries, it is necessary to replace “globalization” with “de-globalization.”

Who is Winning?

China was once a closed economy and an opponent of globalization. Now it is one of the strongest advocates because of the obvious benefits that it offers. Globalization has unquestionably helped hundreds of millions of people to be lifted out of poverty. Hunger, the bane of China for millennia, has been effectively wiped out. In today’s China, people are hungry for streaming media on their smartphones and high-speed train trips to exotic locations. Desperation has long given way to aspiration.

But this process of globalization was not simply China’s gain at a loss to others. It has truly been a win-win for just about all. National incomes are up consistently in recent decades and while average wages in many countries have not risen significantly, the money in people’s wallets goes much further than it ever used to. The basic goods of modern life are drastically more affordable because in the past three decades China has exported huge savings in living expenses through cheaper products.

Of course, by becoming the “factory of the world,” China’s rise did indeed reallocate some  jobs in the West. Or rather, forced Western countries to face inefficiencies and find other routes to development, which to a surprising extent they have made progress in doing. The economies of Europe and the US are dramatically different from 30 years ago—more flexible, with higher productivity and generally higher living standards across the board.

And here, too, is an interesting historical mirror image. In the days before it joined the WTO, China also had a strong contingent of anti-globalization voices. The loudest among them were the state-owned enterprises, and their professed fears were strikingly familiar—that Chinese companies would be wiped out in the face of open competition with foreign companies, and that once-secure jobs would evaporate. But the leaders at the time, particularly Premier Zhu Rongji, blazed a trail ahead, and in the end both China and the world benefitted.

Re-globalization

Now as then, protecting inefficiency is not the answer to the problem. What is needed is not “de-globalization” but “re-globalization,” a fresh approach to the process of integrating the disparate economies of the world in a way that is equitable to as many people as possible. And re-globalization needs to also take into account the reasonable requirements of global companies for fair access to the ever-expanding China market.

The signs of opposition to globalization are currently much in evidence, but globalization should not and will not end here. The increasingly global approach of the Internet and transnational corporations, for instance, will continue to grow regardless of election results or other changes anywhere.

The next period of “re-globalization,” however, will be differentiated from the globalization process of the past few decades in several ways. Firstly, science and technology will develop more rapidly, with artificial intelligence, and profound advances in medicine and the life sciences, generating all sorts of global opportunities and new problems.

This next phase will also see a shift in the rankings of the players. The last round of globalization was dominated by the United States, whereas in the years ahead, neither the US nor China will dominate—it will rather be a multi-polar scenario, with India and other dynamic economies, as well as globally competitive sectors in advanced economies also playing much more balanced roles.

A third feature is likely to be a shift from dominance of multinational companies through to a much bigger role for small and medium-sized enterprises and even interest groups on the Internet such as Wikipedia.

China’s position vis-a-vis other nations has shifted dramatically since the start of this globalization story in the early 1980s. In those days, its role in the world economy was minuscule and so in consequence was its voice. But today China is a major player by any measure, and will inevitably and rightfully have a major voice in the way in which economic relationships change in the years ahead.

It is of course in the interest of China to have continued globalization, and the tremors that are shaking Western societies need to be recognized and addressed. But the answer is certainly not the erection of walls.

One factor to consider is the paradigm-bending changes to production that are likely soon to hit us. In the not-too-distant future, manufacturing jobs will not be threatened by cheaper workers in foreign lands, but by a far more disciplined army of tireless machines—the robots are coming, even to China. Job losses to other humans will pale in comparison to job losses to robots.

For all the complaining in certain quarters, the West today is better equipped to deal with the revolution that robots may unleash. The reason is, simply, that manufacturing jobs have been disappearing from the West for decades, and the workforce has already gone a long way in adapting to that by switching to the service and knowledge economy. Making that same transition is a goal of the Chinese government, but China will not have the luxury of time on its side. And although the crystal ball never produces a clear image, it is a safe bet that the world cannot afford to let China deal with the transition pains all on its own. A new approach to globalization will be necessary.

The next phase of globalization will likely be about much more than labor and trade deals, it will be about a deeper intertwining of technology, society and culture on a global scale. This new era is already on the world’s doorstep. A factory worker, even one in a highly globalized system of trade, is ultimately walled off, a faceless producer of shoes, or steel, or even those magically powerful instruments of communication, smart phones. But a knowledge worker, or a cultural worker, is not.

The workforce in the technology and information industries that is driving the future of humanity is remarkably more fluid. As of this year, 37% of workers in Silicon Valley are foreign-born. Many of them are Chinese, and many return to China to bring their knowledge and experience with them to break new ground at home.

Given the technological nature of these changes, they will affect everyone simultaneously, and will be as unhampered by national borders as is the weather. That does not, however, mean that the work of business and political relationships is somehow lessened—on the contrary, the importance is magnified.

This means, among other things, that a newly-powerful China will command not only a  greater say in international matters, but also bear a greater responsibility. China’s re-globalization interests need to better take into consideration the community interests of its business partners, be it in the Midwestern United States, in France with its wineries, or in countries across Africa. In short, these relationships demand a certain reciprocity that China, now more than ever, has the duty to deliver.

On Deck

What is for sure is that, whatever happens, China and other players will have a seat at the table of globalization. And just like the opening-up all those decades ago, that is unquestionably a good thing. Resolving the issues at the heart of globalization is the responsibility of all and they can only be solved by a world working together, as one, not through the implementation of a mélange of national solutions.

The uncertainty of it all is scary, to be sure, and all players feel the pressure of the future. But a connected world is the only future that can be sustained, and this is a time to re-evaluate and re-invigorate globalization, not turn away from it. So take a deep breath and share a Coke with someone. Or perhaps instead a cup of the world’s original globalized beverage: tea.

You may also like

Going Global

Chinese brands have historically been seen as producing cheap, low-quality products, but both quality and global perceptions are changing.

by Faye Bradley | Aug. 10 2022

Globalization in a Divided Yet Connected World

Globalization in its current form appears to be ending. As we enter its next stage, it’s important to keep some key.

by Zhou Li | Aug. 2 2022

Solving the Fertility Conundrum

China’s ultra-low fertility rates will severely hamper the country’s growth in the coming years. What must be done to.

by Ouyang Hui | Apr. 18 2022

Burning out

The hardworking approach of Chinese people is the driving force behind the country’s unmatched growth, but attitudes are starting to shift.

by Leslie Wang | Apr. 18 2022