The impact of globalization in China

The impact of globalization in chinaglobalization is a widely used term which advise be describe or defined in various ways plainly if we be to describe it in frugalal terms there be lot of definitions which all(a) b a nonher(prenominal)s down to the same point which is the removal of barriers at bottomg boarders in crop for free movement of goods and servicesHow to view ball-shapedizationGlobalization is the objective trend of economic civilizement in the beingness today, cause by free flow and optimized allocation of dandy, technology, information and service in the global context. It is the inevitable result of the development of productive forces and advances of science and technology, particularly the revolution of information technology since the 1980s and 1990s.As a result, economic interdependence and interaction in the midst of countries ar becoming ever stronger. In this massive tide of economic globalisation, no demesne after part develop and prosper in isolation. chinawargon has learnt from her long history that isolation leads to backwardness. festering,progress and prosperity could except be maked done interruption to and integrating with the outside ground, with stepping up exchanges and cooperation with other countries and through absorbing all fine results of kind civilization. Therefore, we should embrace and seize the opportunities presented by globalization and adopt reforms to keep up with the steps of the changing world.Challenges brought by GlobalizationDue to the lack of a solely and equitable planetary economic order, the influence of globalization on countries at different stages of development is entirely different. The dividends derived from globalization are non fairly distri anded. The developed countries turn over apparent advantages in capital, technology, human preferences and administrative expertise and in surplusizeting the rules of the wager. They are usually the most agile propeller s and the biggest beneficiaries of globalization. The develop countries on the other hand are on the exclusively in an unfavorably position. Developing countries can obtain some remote enthronement, advanced technologies and management expertise, and at the same age they are the most vulnerable to the ban impacts of globalization and lack the ability to efficaciously fend off and reduce the risks and pitfalls that come along with globalization. In the 1990s, specially in recent days, the gap between the North and the mho has provided widened. The economic s overeignty and economic security of the developing countries are confronted with rattling(a) pressure and stern challenges. Some least-developed countries are nonetheless on the door of being marginalized by globalization. Therefore, in battle of globalization, developing countries should always be on alert and try by all means to motion the advantages and avoid all kinds of risk and harm.mainland chinas Expe rienceFor China, globalization is often seen as a double-edged sword that brings both opportunities and challenges, advantages and hurts. How to turn disadvantages into advantages in the tidal wave of globalization depends on formulating the correct policies and st computegies. If the policies are correct, challenges can be turned into opportunities. China has learnt m each lessons and compile rich ascertains in relations with globalisation from its practice of reform and opening-up. In my personal opinion, they can be summarized as follows1. To find a road of development that suits the depicted object conditions. In the past 20-odd old age, China has maintained an annual suppuration rate of over 9.3% on average. China is now the 6th largest delivery and the 5th largest affair nation in the world. More than 200 one million million people hold up been lifted out of poverty. The average life expectancy reached 71.8 years in 2002, cobblers last to that of a medium-level deve loped country. The above accomplishments were achieved a constructst the backdrop of a volatile transnational situation. The reason why China can achieve so a good deal in such a short span of time and in a constantly changing foreign environment is because China has set in motion its own road of development, suitable to its national conditions, namely twist well-disposedism with Chinese characteristics. In one word, building complaisantism with Chinese characteristics is to base what we do on the realities of China. While sticking to the basic administration of favorableism, reforms should be carried out to solve the problems of incompatibility between the productive forces and the relations of production, and between economic base and the superstructure, so as to achieve self-perfection of sociableism. each country is different from the other. While it is of the essence(predicate) to learn from other countries in the world, no country should simply copy other countrie s model.2. To adopt opening-up policy. Chinas opening to the outside world is comprehensive. It opens not only to developed countries, provided withal to developing countries, not only in economic field, but likewise in all areas of social development. At the same time, it is not a blind opening, but a self-conscious one, not a disorganize opening but a systematic one. Chinas opening proceeds and deepens in a gradual and step by step fashion. It started from the 4 special economic zones, to coastal cities, then to capital cities of inland provinces and now it has reached an droll stage of all-round opening demonstrated by Chinas accession to the existence Trade Organization. During its opening-up, China paid special attention to give right incline to its comparative advantages to actively acquire world-wide cooperation and competition. For instance, China has in full exploited its advantages of low cost of labour to attract foreign enthronization and technology to com e to economic development and better efficiency and tint of economic growth. These measures have brought the Chinese scrimping increasingly merged with the world economy.3. To promote regional cooperation for better risk-resistance ability. Due to weakness in economic strength, its difficult for developing countries to resist the risk brought just nearly by globalization on their own. Therefore, they should, through strengthening regional economic cooperation, rely on group strength to stand risks. Today, regional and sub-regional cooperation is becoming increasingly active. They equilibrize and correlate with the trend of globalization. China has signed the Framework Agreement with ASEAN on Comprehensive economical Cooperation with the arrive of establishing China-ASEAN Free Trade Zone in 2010. The Shanghai Cooperation Organization is too forging constrictiver economic colligate alongside with cooperation in security issues.Strengthening cross-Taiwan straits economic th ink conforms to the pattern of economic development, serves the overall interests of the Chinese nation and complies with the trend of globalization. To set obstacle to this trend is unwise and is bound to fail. More than 3 million people travelled across the Taiwan Straits, with the two-way trade compass 44.6 one million million million US dollars in 2002, an increase of 38% over the prior year. More than 60,000 Taiwan enterprises have invested in the mainland. By the end of 2002, the accumulated cross-straits trade was 267.9 billion US dollars, among which Taiwan enjoys a trade redundant of 182.6 billion US dollars. Now Taiwan is mainlands 4th largest trading partner. The mainland is Taiwans largest tradeing destination and the biggest source of trade surplus. With regard to Hong Kong, to a greater achievement than 50% of foreign investment China has attracted so far comes through Hong Kong. The above figures have clearly attested to a growing economic interdependence bet ween the mainland, Hong Kong and Taiwan. We strongly hope that the Taiwan authorities can have a clear understanding of the situation and does not move against the tide of history.4. To be vigilant against various risks, especially financial risks. The Asiatic financial crisis in 1997 has clearly been a microcosm of the challenges and dangers involved in economic globalization. When the crisis swept Asian countries, China adopted a responsible draw near. China not only persisted not to de survey its own currency, but also contributed more than than US$ 4 billion through bilateral and multi-lateral channels to serve up the affected countries. This has helped to stabilize the financial situation in Asia as well as the world. Many lessons could be drawn from this crisis. Developing countries have to pay special attention to the restructuring and strengthening of their financial system. Developing countries should keep the destiny of their economy in their own hands and should not lose the grip to others.5. To push for the establishment of a recent international economic order which is just and rational. A globalized economy shoot the breezes for globalized regulation and cooperation. All countries, big or comminuted, curt or rich, strong or weak, should have the right of equal participation in international economic affairs, and the formulation and revision of rule of the game should not be determined by only a small number of countries or groups of countries. To establish a fair and rational international economic order is the only way to ensure that the benefits of globalization are shared more widely and equitably. The new order should uphold the article of faith of equality and mutual benefit and common development. It should be conducive to realize the gap between the North and South so as to cultivate it possible for the trend of economic globalization to evolve in the ranktal favorable to the common prosperity of mankind.The United Nations R eport on gentle Development shows that the trend of globalization has made the poor poorer and the rich richer. If such a situation were to incubate, not only the economic development of the developing countries would be in jeopardy, the economies of the developed countries would also face difficulties in achieving a steady and sustainable growth. In the abut of globalization, the developed countries should assume more responsibilities in such fields as restraining the speculative factors in international capital flow, alleviating the debt bear down of poor countries, opening the marketplaces and furthering technology designate to help the economic development of developing countries. In return, they allow for enjoy more markets and investment opportunities to ensure long-term prosperity. It is indeed a win-win situation which is silk hat testified by the grammatical case of China.Chinas Contribution to World EconomyChinas participation in Globalization is by no means a one -way street. When the world economic growth remains weak, Chinas economy is one of the few brilliantly spots. As World Bank Report on Global Development Finance 2003 published in early April pointed out that Chinas fast growth helped to drive the recovery in East Asia. Together with policy stimulant drug in other countries, Chinas performance lifted the region to growth of 6.7 % in 2002, up from 5.5% in 2001. Average regional growth of more than 6% is expected for the bordering two years, with China increasingly becoming the railway locomotive of the regional economy.China has also provided the world with the largest rising market. When more than 1.25 billion people become well-off, the demand on everything allow for be enormous. on the dot to give you an example, in the coming 10 years alone, China will import US$ 2 trillion of goods from the outside world. A recent article in the Economist spunkylighted the benefits brought by Chinas growth Millions of consumers in other cou ntries are gaining from the low prices and high quality of Chinese goods. A billion Chinese are escaping the dire poverty of the past. championship across the chunk will profit from supplying a vast new market. These are wonders to be celebrated, not threats to be agonized over..China (SMEs) And The internationalisation subprogram of Chinese EnterpreneursChinese privately owned, small and medium-sized enterprises (SMEs) are rapidly internationalizing, as stock-still little research has been reported about how these entrepreneurs manage decisions during internationalisation. This study investigates how social networks (guanxi) are used when making strategic, combative, and marketing decisions. Interviews in China with a small sample of SME entrepreneurs revealed that cultural and cultural factors play a surprisingly important role in their victoryful internationalisation. In the article, we discuss managerial implications for successful internationalisation of Chinese en trepreneurs, we question the completeness of live theories on the internationalization mold, and we propose specific influenceions for future research. 2009 Wiley Periodicals, Inc. Little scholarly research has been conducted on how Chinese small and medium-sized enterprises (SMEs) undertake internationalization. This is surprising when one considers the very momentous contributions made by SMEs to national economic growth in China in recent years. For example, 2.2 million fully private enterprises were operating in China in 2002, accounting for U.S. $200 billion in investment and employing 29.3 million people (Peoples Daily, 2002). By 2004, the nonpublic arena accounted for 53 part of total employment, up from only 17 percent in 1995 (Demurger, Fournier, Shi, Zhong, 2007). In 2005, approximately 50 percent of Chinas GDP was the result of activity in the private sector (National Bureau of Statistics of China, 2006), and this was forecast by the Chinese honorary society of S ocial Sciences to rise to more than 75 percent in the next five years (Peoples Daily, 2006). Similarly, RTTNews (2006) has predicted that 70 percent of all Chinese enterprises will eventually belong to the private sector, creating eight out of ten new nonagricultural jobs. By 2007, registered capital in the Chinese private sector was set at 10.1 trillion yuan (approximately U.S. $1.42 trillion), growing at an annual rate of 22.7 percent (Xinhua News Agency, 2008). Indicators such as these demonstrate that Chinese entrepreneurs play a key role in the national economy, and umpteen aim to become a force in the global market set through internationalization (I. H. Chow, 2000 Humphreys, 2007). The goal of this study is to understand how Chinese entrepreneurs in SMEs are using their social networks to internationalize their operations. (Hereafter, we refer to social networks interchangeably as guanxi, following Zhou, Wu, Luo, 2007.) A basic premise is the recognition that factors in an y sociocultural and backup environment will directly affect the behavior, performance, and success of local entrepreneurs (Kim, Hurh, Fernandez, 1989). This is particularly true in China, where social networking through guanxi has been found to determine success not only in billet activities, but also in industrialization and modernization (Hutchings Weir, 2006). Three research questions luff this study What motivates Chinese entrepreneurs to undertake internationalization? What paths do Chinese entrepreneurs take toward internationalization? what role do culture and social networks (guanxi) play in Chinese SMEentrepreneurs path of internationalization? 2009 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com) Global Business and Organizational Excellence DOI 10.1002/joe.20299 November/ declination 2009 61 The first two questions relate to microlevel issues and decisions involving entrepreneurs themselves, whereas the third question mar rys these decisions conceptually to elements in the broader social context of the Chinesemarket.We expect to find that guanxi plays a significant, if not critical, role in any internationalization efforts by Chinese entrepreneurs. We first present a brief economic profile of the Chinese market in order to characterize local conditions in which Chinese SME entrepreneurs undertake nternationalization. Next, we review germane(predicate) contributions to the literature in order to establish a theoretical nates for developing an interview protocol for use in personal interviews with entrepreneurs in China. Our research method is described in detail before results are presented and compared to previous findings reported in the literature. This closedloop approach is a key feature of the study because it ensures that our results do not remain merely anecdotal but are fully integrated into the lively body of knowledge. Then we research managerial implications, acknowledge limitations of the study, and outline specific avenues for further research. This is a pioneering abstract of cultural factors affecting internationalization of Chinese entrepreneurs. Findings from this exploratory research will lead us to conclude that current theories of internationalization do not adequately reflect the actual experience of Chinese entrepreneurs who use guanxi for internationalization. This is a key contribution of the article and is digested by an urgent call for scholars to re-examine established theories in light of the new realities of internationalization, as the process is being experienced in China. The Chinese Economy and Chinese Entrepreneurs in SMEs By the late 1970s, Lester (1978) had already recognized that the entrepreneurial orientation of Chinese people would become a source of real strength for the national economy. Wei, Varela, and Hassan (2002) reinforced this early prediction, suggesting that Chinese privatization would bring about the largest transformati on of industrial ownership in modern history. Their results confirmed that newly privatized Chinese firms achieve higher profitability, greater levels of employment, and better sales efficiency than state-owned enterprises (SOEs). Although SOEs still immensely outnumber private firms, their performance has been hampered by a complex appoint of massive debts, inefficient organization and operation, and lost profits. Since the early 1980s, Chinas private sector has grown at an annual rate of 20 percent, which is a much faster rate than the 9.5 percent rate of growth for the national economy over the last 20 years (Peoples Daily, 2002). All these successes led claw and Tse (2001, p. 5) to characterize China as the largest, the fastest growing, and the most heavily enmeshed in international worry and investment among transitional economies. Although SOEs still immensely outnumber private firms, their performance has been hampered by a complex burden of massive debts, inefficient org anization and operation, and lost profits. It is ironic, however, that, prior to 1999, the Chinese government had barred entrepreneurs from operating directly in foreign trade, only authorizing them to conduct international business through intermediary SOEs. Financing options were also tightly restricted, which seriously hindered the growth of SMEs. Fortunately, after January 1, 1999, private firms were allowed to seek import and exportation licenses from the Ministry of Foreign Trade and Economic Cooperation of China (2002). After China coupled the World Trade Organization in 2001, private firms were permitted to trade freely and directly with foreign companies, if they satisfied certain conditions (such as registration, size, and financial get byncy). Economic liberalization released much pent-up energy among entrepreneurs in SMEs, 62 November/December 2009 DOI 10.1002/joe Global Business and Organizational Excellence including a commit to internationalize, as this study will demonstrate Theinternationalization ProcessInternationalization of the firm is customarily regarded as a process of successive stages of outbound expansion by the firm (see Cavusgil, 1980 Johanson Vahlne, 1977 Turnbull, 1981 Wind, Douglas, Perlmutter, 1973). It is also seen as a dogging process of strategic decision making (Melin, 1992), with emphasis on international market selection and choice of mode of foundation (Bradley, 1995). This process takes place in a gradual and orderly manner, incorporating nurture from domestic market growth, which, in turn, provides experience useful in future xport activities (Cavusgil, 1982). Two combinatorial theoretical models are widely accepted as explaining critical components of the internationalization process. These are Rogerss (1962) insertion- relate model (designated as the I-model) and the Uppsala Schools model (the U-model). Both the U-model and the I-model are behaviorally oriented, to that extent as managers are assumed to t ake decisions and actions consecutively as they gain new information and assimilate new experience. Each theory is related to the present study in the next two sections. The I-Model and Chinese SMEs Internationalization Process. Rogerss (1962) I-model framed the decision to go international as an innovation for the firm, force attention to a necessary acquisition sequence that is involved in adopting any innovation (see Anderson, 1993). Managers typically requirement large amounts of information, both to chasten for lack of prior knowledge or experience and to educe the high levels of uncertainty routinely associated with large-scale innovation (such as internationalization). Managers typically need large amounts of information, both to compensate for lack of prior knowledge or experience and to reduce the high levels of uncertainty routinely associated with large-scale innovation (such as internationalization). In the case of Chinese entrepreneurs, we expect them to turn instin ctively to their social networks (guanxi) as sources of information. We expect them to rely heavily on colleagues, friends, and business contacts for advice about how to handle the risk of internationalization, obtain necessary information, make inform decisions, and plan effectively for further expansion. The U-Model and Chinese SMEs Internationalization Process. The Uppsala Schools U-model, developed by Johanson and iedersheim-Paul (1975), distinguishes four successive phases of market launching (1) no regular export activities (2) exporting through independent agents (3) use of an overseas sales subsidiary lodge and (4) creation of overseas production manufacturing units. This model posits two constructs state and change. market commitment and market knowledge are components of the state construct, while decisions to commit resources and current business performance are components of change. Researchers at the Uppsala School also identified psychicalal distance (PD), referri ng to perceived similarities and differences in culture, political systems, education, and industrial progress between the home country of firm managers and the proposed market of entry (Hallen Wiedersheim-Paul, 1984). Global Business and Organizational Excellence DOI 10.1002/joe November/December 2009 63 PD theory holds that managers are less likely to enter country markets that they perceive to be dissimilar from their home market (Jain, 1989 Johanson Wiedersheim-Paul, 1975). Based on this model, we developed some general expectations about how Chinese entrepreneurs in SMEs approach the decision to internationalize operations, adopt which country markets to target first, determine how they come up about these markets (in terms of PD), make decisions about modes of market entry, type and sum of resources to commit to the new venture, and how to manage future expansion.Factors Affecting Internationalization by Chinese EntrepreneursParticipants in our sample identified a range o f comical and inimitable competitive advantages that flow from their human capital and organizational capital resources. These include membership in extensive domestic social and business networks access to overseas Chinese networks and contacts access to timely business advice about competitive strategies and access to market information based on real-life experience. In this respect, factors relating to country of origin convey special advantages to Chinese entrepreneurs when going international. From a competitive point of view, Chinese entrepreneurs need to exploit these unique resources to the fullest extent possible because comparable benefits are not typically available to their competitors from the West. In other words, SMEs that are not owned or managed by ethnic Chinese may find themselves at a competitive disadvantage by not having access to these types of unique resources. Some of the factors for successful internationalization by Chinese entrepreneurs in SMEs identifie d in this study can and so be summarized as followsChinese entrepreneurs who enter geographicalally close export markets can use their home base in china as a source of supply.Chinese entrepreneurs who fatten up into culturally or geographically distant markets can reduce the negative effects of perceived psychic distance or actual geographic distance through the support that they receive from guanxi members at home and abroad. Chinese entrepreneurs who enter culturally close ethnic Chinese markets, even at great geographic distance, can continue to build social networks, accumulating further resources of human and organizational capital.Chinese entrepreneurs who expand into culturally or geographically distant markets can reduce the negative effects of perceived psychic distance or actual geographic distance through the support that they receive from guanxi members at home and abroad. Thus, we exhort that Chinese entrepreneurial SMEs make full and continuing use of social netwo rks when considering, initiating, and pursuing internationalization activities make full and continuing use of social networks as sources of general business information, market-specific knowledge and advice, and insights about competitive strategiescontinue to expand social networks domestically and internationally through contacts with overseas Chinese in geographically distant markets.Opportunities for Partnering With ChineseEntrepreneurs in SMEs Chinas economy has enjoyed many years of highlevelg rowth, and its domestic market has proven to be a attracter for direct investment by foreign companies. Large Chinese companies and SOEs as well have benefited from working with foreign partners in their home market, thereby accelerating their learning curve for doing business overseas. Yet it is the private sector in China that is expected to be theengine of future economic growth, and SMEs, for their part, will play an increasingly important role as global competitors. Chinas econom y has enjoyed many years of highlevel growth, and its domestic market has proven to be a magnet for direct investment by foreign companies. Many Chinese entrepreneurs who own or manage SMEs are increasingly determined to enter overseas markets, as illustrated by members of our sample. Foreign companies looking to enter China must therefore actively consider how they might work with this new type of partner. phrase ventures that manufacture products in China for export to world markets will render some valuable reciprocal benefits accelerated learning for the Chinese entrepreneur, balance by the possibility of eventual assimilation of the foreign partner into a Chinese social network. Good guanxi with Chinese partners will doubtless reach tremendous long-term strategic and competitive benefits for foreign partners. Not only will they gain access to domestic market segments in China, but they will also be able to build competitive advantage, as insiders in social networks. Contribu tions and Future Research Contributions This study provides interesting and even surprising qualitative insights into the actual experience of Chinese entrepreneurs who are managing international decisions. Throughout the article, we have discussed our results by reference to results from earlier research and existing theoretical constructs. Our findings have generally supported previous results, confirming the value of dominant theories such as internationalization the resource-based view of the firm resource availability sources, types, and uses of information development of global strategy modes of market entry and selection of target markets. Less support has been found for application of theories about born global firms and asset-seeking behavior. Based on this study, we conclude that guanxi must be recognized as a sine qua non factor in the process of internationalization of entrepreneurial Chinese SMEs. Guanxi represents a unique and inimitable competitive resource that combi nes elements of human and organizational capital. This being the case, it appears unavoidable that any reason out theory of the internationalization process must recognize and include a social network construct. Yet this is not the case at the moment, as yet as the I-Model and U-Model theories are concerned. As a consequence, we consider that the main contribution of this exploratory and pioneering study is to call into question the completeness of current theories of internationalization. Our evidence, albeit modest, suggests that none of these theories yet adequately identifies and includes all factors affecting the internationalization process for firms beyond those of western sandwich Europe and North America. This shortcoming is particularly apparent in the case of the internationalization of small and medium-sized Chinese entrepreneurial firms. Our concern about shortcomings of current internationalization theory has received recent support from Elango and Pattnaik (2007). T heir study of Indian firms membership in business groups concludes that . . . certain assumptions and notions of the Uppsala model (i.e., deterministic sequential stages, commitment, state/change variables) need to be extended to incorporate the confluences of Global Business and Organizational Excellence DOI 10.1002/joe November/December 2009 73 these linkages within a firms network (Elango Pattnaik, 2007, p. 551). In addition, these authors propose a theoretical link between network membership and an improved ability to reduce the liabilities of foreignness (mentioned earlier) through shared learning by members of the network. For our part, we would represent that other important theories mentioned in this article, such as membership in large business groups, social embeddedness, and absorptive capacity, also need to be properly integrated into any general theory of internationalization. The need for further work is all the more urgent as we see new firms (such as Chinese SMEs) entering international markets from their home base in emerging economies. The unique competitive advantages associated with guanxi make it possible, despite limited company resources, for Chinese SMEs to select, enter, and compete in geographically distant markets (such as Canada and South Africa) in a way that current theory would not predict. Furthermore, our findings call attention to the shortcomings of psychic distance theory. The unique competitive advantages associated with guanxi make it possible, despite limited company resources, for Chinese SMEs to select, enter, and compete in geographically distant markets (such as Canada and South Africa) in a way that current theory would not predict. Moreover, PD theory does not adequately encompass the workings of guanxi, either as a compensatory factor for lack of market knowledge and prior experience or as a means of reducing uncertainty in decision making. Elango and Pattnaik (2007) concur with our conclusion, stating that furt her research is needed into how members of networks and business groups choose their overseas customers and markets, and how they build global market portfolios. A theoretical abstracted link here appears to be the unseen workings of guanxi and business networks. Finally, we would argue that learning theory needs to be revisited in the context of the internationalization of the firm. Social networks must be properly recognized as elementary sources of information, rapid learning, and vicarious knowledge. Once again, we are supported by Elango and Pattnaik (2007, p. 552), who pep up that future researchers may want to look into how firms within and network transfer learning (i.e., internationalization knowledge Eriksson et al., 1997) to other members. . . because it is still not evident what formal or informal mechanisms are used for transfer of learning (emphases added).Blueprint for Future DevelopmentThe first 10 to 20 years of this century