Analyzing China's Economic Impact on Global Trade and Business (2020)

This essay examines the implications of China's potential rise to become the world's largest economy, focusing on the impacts on the global trading system, the world monetary system, and the business strategies of European and US-based global corporations. It discusses China's economic growth over the past few decades, its integration into the global economy through the "Open Door Policy" and WTO membership, and the trade-related challenges and opportunities it presents. The essay also analyzes the effects of the US-China trade war, including tariffs and retaliatory measures, on international organizations and their business strategies. Ultimately, it concludes that China's economic growth significantly influences global trade, monetary policies, and the strategies of multinational organizations.

Running head: MARKETS AND COMPETITION
MARKETS AND COMPETITION
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Author Note

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Introduction
The economy of China has shown immense levels of growth in the last 30 years and is
on the way of becoming the largest economy of the world in the future. The success of the
economy is thereby based on the ways by which the mixed economy of the country has been
able to incorporate the limited levels of capitalism in the command economy. The spending
of the Chinese government has been able to act as a major reason behind the effective levels
of growth of the economy (Ansar et al., 2016). The gross domestic product or GDP is a
measure which is related to the growth rates of Chinese economy. The growth of Chinese
economy was more than 23 trillion Dollars in the year 2017. The economic growth of the
country has however slowed down in the last few years after the year 2013.
The essay will be based on the analysis of the ways by which the growth of Chinese
economy has increased in the last few years and its effects on different aspects like, the
trading system of the world, monetary system of the world and the business based strategy of
the European and the US based global organizations in the world. The trends that are
currently prevalent in the different industries and their effects on the economy will be
analysed in the essay in detail.
Discussion based on the growth of the economy of China
Effect of the growth of Chinese economy on the world trading system
According to Baskaran, Feld and Schnellenbach, (2016), the global business based
experts are mainly aware of the historical impact that the economy of China has on the trade
related activities conducted in different countries. The country and its economy is expected to
grow in the next few years. The various trade based issues that are faced by China are able to
provide many opportunities and challenges to the global traders all over the world. The

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economic growth of China has been able to outpace the entire world by more than 6%. The
gross domestic product or GDP of China is 10.9 trillion Dollars which is behind that of US at
17.9 trillion Dollars. The size of the Chinese economy is considered to be as large as that of
Europe.
The different forecasts have depicted that the economy of China can become the
largest by the year 2030. The economy has been affected in a positive manner with the help
of its export-base qualities. Chinese economy is reaching the point of maturation and process
is evolving in a continuous manner. The economy of China was considered to be insular
communist in nature after the World War II. However, the “Open Door Policy” had been
implemented by the organization in the 1980s. The country has taken major steps based on
moderation of the state-control and has moved towards the market economy (Bhattacharya,
Rafiq & Bhattacharya, 2015).
As discussed by Friedman (2017), the economic activities had however faced major
issues related to the crackdown which had taken place based on the Tiananmen Square
Protests which had taken place in the year 1989. China had thereby been led to the fraternity
of world economy with the help of access that it had gained to World Trade Organization or
WTO. The status of the country that has been developed in the Chinese economy is
considered to be quite controversial in nature. The designation of China as a non-market
based economy has been a major issue which affects the position of the country in WTO.
The economy of the country is designated in such a manner as it is operated by the
state and is not affected by different forces in the market. The countervailing and anti-
dumping based duties are adjusted by the US and the other WTO member countries on the
imports from China. This has led to more than 100 anti-dumping cases and 41 countervailing
cases between the US and China (Economictimes.com., 2019). The country has also raised

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disputes that are related to the elimination of the NME based label from its economy. The US
Department of Commerce has raised huge number of issues against the Chinese economy and
its operations. The issues are mainly related to the limitations which are present in the
country based on foreign investments, policies related to manipulation of policies and
bargaining related to the labour rights as well (Friedman & McCormick, 2015).
The labour related issues had also taken place in the country which was based on
different forced labour based activities of the country. China had signed a free trade based
agreement with the Association of Southeast Asian Nations or ASEAN which consists of ten
members on 1st January 2010. This is considered to be the biggest global free trade based
agreement with respect to the population levels. This agreement has been able to play a major
role in providing China with a position ahead of the US. The country is further trying to
expand the agreement with ASEAN country members with the help of proper negotiation
with Regional Comprehensive Economic Partnership or RCEP (Koo & Perkins, 2016).
RCEP will represent the global trading based bloc and is able to bring the China at par
with the other nations with respect to political and economic factors. China is continuously
providing competition to the US in the trade leadership based position that can be gained in
Asia. Another major step which has been taken by China for aiming at effective economic
growth is based on the development of Silk Road which can be considered to be a massive
infrastructure based growth (Lardy, 2016).
The construction of the original Silk Road had started in the 200 BCE for
development of trade based activities from China to Mediterranean Sea. This road has played
a key role in the development of the regions in an effective way. The modern project of Silk
Road is considered to be an improvement based venture which has been able to increase the

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levels of connectivity in different regions and development of areas like, Eurasia, China,
Africa and Oceania (Lardy, 2016).
Effect of the growth of Chinese economy on the world monetary system
According to Li and Lin (2017), the economies of the US and China are able to
dominate the monetary system of the world. The nature of the relationships that have been
developed among the two economies are able to affect the financial systems and global trade
based activities as well. The financial crisis which has taken place has affected the Chinese
economy in a huge manner. The monetary policies which are developed by different
countries are affected by levels of integration which have taken place among the economies
of the economies of US and China.
China requires high levels of export based growth for the purpose of maintaining
growth of jobs and development of social stability as well. The exchange based rates in the
market have also been affected by the relationship between the two countries. The policy
based on exchange rate of China is considered to be a major factor that has been able to affect
the relationship that is developed by the two countries. The levels of increase in the trade
deficit of the US and on the other hand, the increase of trade surplus in China is a major
factor that has a major impact on the relationships between the economies of the two
countries (Lu, 2018).
According to Park (2018), the US had further accused China for manipulations of the
currency based rates. The tariffs related to US imports from the country and different
retaliatory measures which have been taken by China have affected the relationships between
the two countries in a huge manner. The bill named “Buy American” has acted as a major
stimulus that is able to affect the imports from China and different emerging markets. The
International Monetary Fund or IMF has stated that the tit-for-tat based tariffs can reduce the

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0.5% of the entire global growth by the year 2020. The growth of the manufacturing sector of
China has started slowing down and sentiment of US consumers has also been affected in a
huge manner.
Business strategy of the European and US-based global organizations
As discussed by Peng (2018), China and the US have entered into a major trade war
in the last few years and the country has launched a major investigation into the trade based
policies which have developed by China in the year 2017. The trade policies are mainly based
on the tariffs that have been implemented on the Chinese products. However, after some
months of major hostilities among the two countries a breakthrough had been gained in the
month of December in 2017. The trade tariffs had been halted for a term of 90 days. The US
has further imposed three major rounds based on tariffs on the Chinese goods which
amounted to a total of greater than 250 Billion Dollars.
Tariffs have also been implemented on different goods including washing machines
and steel that can have a major impact different products from China. The international and
US based organizations have been affected in a huge manner by the trade war that has taken
place in the country. China has taken a decision related to the implementation of new tariffs
on greater than 5000 US based products, as the US had threatened to impose 25% of the
tariffs on 200 Billion Dollars of the US goods. Three major US based automobile
organizations have been affected in a huge manner by the trade war that has taken place with
China (Bbc.com., 2019).
The profit based forecasts of the major organizations like, General Motors and Ford
have been quite low due to the increase in prices of the aluminium and steel. On the other
hand, the revenue based outlook of Fiat Chrysler is also quite low. Jaguar Land Rover that is
considered to be the largest automobile based firm in the US has reported high levels loss in

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the last three years. The US based and European car organizations have started responding to
the trade war and tariff changes by China. BMW has raised the prices of two models from the
30th of July due to the increase on the import based duties on the US-based cars in China
(Wu, Zhuo & Wu, 2017).
The US based organizations or the organizations which operate in the US have been
affected in a huge manner by the trade war between the two countries. On the other hand,
Coca Cola has said that it aims at increasing the prices of products in North America for the
purpose of compensating for the high freight rates and the metal prices as well. Other small
organizations have also been affected by the issues which have taken place between the two
countries. The toymaker based organization named Hasbro has started moving its production
activities from China. Another US based conglomerate named Honeywell uses the supply
chain based sources from different countries outside China (Yang, Wang & Shi, 2017). The
trade related issues have been able to play a major role in the changes that have been seen in
the tariffs related to different products that are offered by the multinational organizations in
different countries.
Conclusion
The essay can be concluded by stating that the growth of Chinese economy is able to
affect the trade related activities that are performed by different countries. The monetary
policies of the countries are influenced in a huge manner by the changes that have taken place
in the economy of China. The trade war which has recently taken place among US and China
that are the two biggest economies of the world have affected different global organizations
of both the countries. The changes in tariffs related to different products and raw materials
have a major impact on the US based organizations and major European companies as well.

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The trade war is thereby considered to be an important part of the growth process of Chinese
economy.

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