Economic Policy & Globalisation
Geography: Edexcel A Level, topic 4.1.3
Globalisation - China's Economic Decisions
Choices made by national governments or International Organisations can accelerate globalisation by increasing the interconnections between different countries.
Special Economic Zones (SEZs)
- National Governments can set up Special Economic Zones (SEZs) that help to attract FDI (Foreign Direct Investment) into a region.
- SEZs have been particularly important in new global regions- regions that weren’t previously a key part of the global economy.
- Southern China has lots of SEZs, which are also known as Export Processing Zones.
- China encourages TNCs to locate there by offering low taxes and low labour costs (China's population is very large).
- These SEZs have helped China's economic growth and have helped it to become the 'workshop of the world'.
FDI and urbanisation
- In 1978, the Chinese government adopted their Open Door Policy and opened up the country to investment from abroad.
- This led to the transformation of China with significant economic growth and urbanisation.
- In the 30 years since 1978, 300 million people have moved from the rural areas to the urban areas (rural-urban migration) in search of a better quality of life and increased income.
FDI and TNCs
- China's population (1.4bn people in 2017) was willing to work for low wages. China's Open Door Policy saw it become the ‘work-shop of the world’- producing consumer goods to be exported all over the world.
- China’s Government continues to remain open to globalisation and in 2001 they joined the WTO (World Trade Organisation).
Censorship and TNCs
- Although China has opened its doors to economic globalisation, it still has a ‘closed door’ approach to some global flows.
- For example, social media TNCs such as Facebook and Google are censored with little or no access to the market of China.
- As of 2018, China only allowed 34 foreign films to be screened in cinemas each year.
Free Trade Blocs
Free trade blocs can increase the interconnections between countries by removing tariffs and quotas for trade in goods and services. The EU and NAFTA are examples of free trade blocs.
Removal of tariffs
- Tariffs are effectively taxes on goods that are imported and exported.
- It is hoped that removing tariffs will increase the flows of goods and services between countries, helping to boost economic growth.
- The removal of trade barriers like this should allow TNCs and industries to sell their products to a larger market (more countries).
Removal of quotas
- Quotas are limits on the number (or quantity) of goods and services that can be imported.
Free movement of people
- The EU is an example of a trade bloc that allows the free movement of people.
Exploiting the comparative advantage
- Consumers and producers can exploit the comparative advantage of different countries.
- This means that products can be bought from countries who are most efficient at producing them and so can sell them at a lower cost.
Test yourself on Economic Policy & Globalisation
National Governments can set up Special Economic Zones (SEZs) that help to attract FDI into a region. What does FDI stand for?
What does SEZ stand for?
What are Special Economic Zones also known as?
What do we call the limit on the number or quantity of goods and services that can be imported?
What are tariffs most similar to?