Implications of China's Development on Global Monetary and Trading System

This article discusses the implications of China's development on the global monetary and trading system, including the effects on US and European business strategies. It also examines the lack of transparency in China's policies and the impact on global trade operations.

Running head: GLOBAL MONETARY AND TRADING SYSTEM
GLOBAL MONETARY AND TRADING SYSTEM
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1. Introduction
The development of the different economies is based on the evolving global trends and
the agreements that are signed by the regional countries. The development of US-Mexico-
Canada Agreement (USMCA) and the Comprehensive and Progressive Trans-Pacific Partnership
(CPTPP) might be considered as emerging trends for shaping the economic and trade growth
between nations (Baldwin and Lopez‐Gonzalez 2015). On the contrary, the development of the
different policies for leveraging free trade prospects has significantly modified the global
economic and trade situations. The development of the different pacts and agreements has helped
the nations in collaborating with one another for enhancing the economic situations. On the
contrary, the expansion of corporations in the different developing economies has facilitated an
unprecedented growth.
Therefore, the purpose of undertaking the discussion is to identify the different
implications of the development of China on the global trading and monetary system. On the
contrary, the research will also examine the implications of Chinese developments on the
business strategy of US and European based global corporations.
2. Implications of China's development on the global trading system
The Chinese government released a ten- year plan for encouraging the rapid development
of the high-tech industries, which chiefly comprised of new energy vehicles, next-generation
information technology (IT) and advanced robotics through the implementation of superior AI
techs. The plan named “Made in China 2025” aimed at developing the recent industries in order
to support the ultimate goal of reducing the dependency on foreign technology while promoting

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Chinese high tech manufacturers in the marketplace (Li 2018). However, the opaque activities
and the backchannel coordination affected the ethical perspectives of trade.
The lack of transparency on the operations is chiefly based on the requirement of
avoiding violations to its commitment to the World Trade Organization (WTO) (Müller and
Voigt 2018). On the contrary, plan also developed a policy through which the foreign companies
must enter into joint ventures with Chinese firms for expansion in the Chinese markets. The
forced transfer agreements have affected the trade regulations that are created by the WTO. The
state- led model aimed at controlling the supply chain operations of most of the industries, more
specifically the cobalt industry (Godar et al. 2015). The complete authority over the supply
chains will affect the interests of the modern electronics based companies, which will lead to the
growth of a rival geopolitical power (Pan, Yan and Huang 2016).
In a research, Müller and Voigt (2018) noted that the China’s trade development policies
will not only affect the US but also the global trading system as a whole. On the contrary, the
different trade related policies that are formed by the Chinese government drastically affected the
trade relations of the same with the different economies. Butollo and Lüthje (2017) stated that
the monopolization of power in China would affect the capabilities of the different sectors and
global trade. The international trade is dependent on the economic relations between the rich and
the developing countries. However, the growing rate of exports from the South-East Asian
countries like Cambodia and Vietnam to China has affected the interests of US (Li 2018). On
the contrary, the rigid and complicated conventions for trade that are established by the Chinese
government have affected the capabilities of the global trade operations.

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The 10 year plan that was designed by the Chinese government was opaque which
affected the interests of the different developing and developed economies. The growing
pressure on the foreign economies is based on the maximization of dependence on the Chinese
firms as the Chinese government aimed at controlling the entire supply chain for major foreign
industries. Therefore, the developments that are undertaken by China has affected the global
trade operations.
3. Implications of China's development on the global monetary system
The economic growth of China is portrayed through the investments that are undertaken
by the same in countries like Africa and Latin America. On the contrary, the public lending and
investments made by China in the global platforms helped the same in developing a higher
position among the international financial markets. The nation also undertook steps to influence
the Asian Development Bank and the European Bank for Reconstruction and Development in the
year 2016. The developments have maximized the rate of influence on the International Financial
Institutions. The nation has created different policies and procedures while influencing the IMF
after the implementation of the IMF quota and governance reforms in the year 2015 (Cho 2014).
The Executive Board of the IMF takes the decisions based on the consent from China, which
provided the economy a valuable position in the world economy.
However, the depression in the oil prices over the years affected the economic growth of
Russia, the OPEC countries and the US. On the contrary, Cho (2014) noted that the oversupply
of oil brought about changes in the interest rates and the closure of subsidy systems. The
oversupply was based on the unquenchable needs of China for oil, which brought about major
modifications in the global economy. On the contrary, the Chinese government took steps to

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monopolize the global market structure through induction of control mechanisms over the supply
chain operations. The growing influence of China on the IMF and the opaque activities that are
undertaken by the same has created a negative impact on the operations of the global economies
(Godar et al. 2015). The trade wars between China and US has affected the global economy
largely. The investment-driven economic growth of China has also affected the growth of many
firms with particular rigid regulations for undertaking joint ventures. On the contrary, the export
oriented growth model of the nation created effects like stresses and economic rebalancing. It is
noted that a failure to rebalance the growth model would result to subtle increase in the export
market share (Yukins 2018). China launched policies like “Going Global”, “One Belt One
Road”, “RMB Internationalization” and “Made in China 2025” in order to provide a thrust to
capital flows and the further development of the economy (Baldwin and Lopez‐Gonzalez
2015). Therefore, the opaque activities and the rigid policies that are developed by the Chinese
government affected the global economic situations.
4. Implications of China's development on the business strategy of European and US based
organizations
The enormous development of China has led to the enumeration of US-Mexico-Canada
Agreement (USMCA) and the Comprehensive and Progressive Trans-Pacific Partnership
(CPTPP). The development of the trade agreements between the different western nations has
helped in curtailing the taxation and tariffs. The provisions for the USMCA were based on
providing support to the American farmers, ranchers, and agribusinesses thorough modernization
of food and agriculture trade in North America (Yukins 2018). On the contrary, the framework
also provided anti-corruption based provisions for securing the intellectual property rights. The
uniqueness of the agreement is based on the lower rates of tariff and taxation imposed on the

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imports, which has helped in the development of different SMEs. On the contrary, Pan, Yan
and Huang (2016) noted that China benefitted from the availability of cheap labor force and
lower costs of operations which attracted the attention of a number of foreign firms. Therefore,
US and Europe might take steps to develop cheap labor base and lower the operational costs for
attracting the attention of the foreign direct investors. Moreover, the development of the different
resources will help the European and US governments in attracting the attention of the foreign
investors through the reduction in the operating costs. The lower tariff and trade agreements also
helped the US and European economies in encouraging foreign investments in the developing
markets. Bilateral agreements with the different economies supported the growth and expansion
of the different companies in the US and European markets (Li 2018). Butollo and Lüthje
(2017) noted that the development of the policies and trade regulations in favor of the foreign
investors will help the US and European governments in enhancing trade and GDP of the same.
Therefore, the improvements in the trade agreements will be helping the concerned nations in
attracting the attention of the potential foreign investors through decentralization of the
operations.
5. Conclusion
Therefore, from the above analysis it might be stated that the different developments that
are ma\de by the Chinese economy has greatly affected the global trade and monetary systems.
On the contrary, the research also delineated the implications of the economic development of
China and the manner in which it brought about changes in the business strategy of US and
Europe. The 10 year plan that was formulated by China in the year 2015 has affected the
interests of most of the global powers. Moreover, the lack of clarity in the activities in the plan
formulated by China has affected the interests of the different economies while maintaining the

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balance of trade. China’s centralization of authoritarian power over the IMF has also affected the
interests of the different economies and restricted the growth of the same. Therefore, the research
delineated the different issues that are faced by the economies through centralization of power in
China.

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References
Baldwin, R. and Lopez‐Gonzalez, J., 2015. Supply‐chain trade: A portrait of global patterns and
several testable hypotheses. The World Economy, 38(11), pp.1682-1721.
Butollo, F. and Lüthje, B., 2017. ‘Made in China 2025’: Intelligent Manufacturing and
Work. The new digital workplace: How new technologies revolutionise work, pp.42-61.
Cho, H.J., 2014. Impact of IMF programs on perceived creditworthiness of emerging market
countries: is there a “Nixon-Goes-to-China” effect?. International Studies Quarterly, 58(2),
pp.308-321.
Godar, J., Persson, U.M., Tizado, E.J. and Meyfroidt, P., 2015. Towards more accurate and
policy relevant footprint analyses: tracing fine-scale socio-environmental impacts of production
to consumption. Ecological Economics, 112, pp.25-35.
Li, L., 2018. China's manufacturing locus in 2025: With a comparison of “Made-in-China 2025”
and “Industry 4.0”. Technological Forecasting and Social Change, 135, pp.66-74.
Müller, J.M. and Voigt, K.I., 2018. Sustainable industrial value creation in SMEs: a comparison
between industry 4.0 and Made in China 2025. International Journal of Precision Engineering
and Manufacturing-Green Technology, 5(5), pp.659-670.
Pan, X., Yan, J. and Huang, W., 2016, December. " Made in China 2025" and experimental
platform development of high-end equipment manufacturing virtual and simulation experiment
teaching center. In 2016 IEEE 8th International Conference on Engineering Education
(ICEED) (pp. 86-90). IEEE.

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Yukins, C.R., 2018. The US-Mexico-Canada Agreement (USMCA): Some Surprising Outcomes
in Procurement. GWU Law School Public Law Research Paper, (2018-45), p.60.

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Appendix
Appendice 1
Figure 1: China’s Economic indicators 2000-2015
(Source: Li 2018)

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Appendice 3