Chat with AI
International Business 11th Edition by Charles Hill ,Tomas Hult
Edition 11ISBN: 978-1259578113International Business 11th Edition by Charles Hill ,Tomas Hult
Edition 11ISBN: 978-1259578113 Exercise 2
If current trends continue, China may be the world's largest economy by 2030. Discuss the possible implications of such a development for ( a ) the world trading system, ( b ) the world monetary system, ( c ) the business strategy of today's European and U.S.-based global corporations, and ( d ) global commodity prices.
Explanation
Verified
Verified
As per data available from the World Bank and WTO databases, China's share of world output and share of world exports is shown below
The data shows that already in the year 2013, China was the second largest economy after the United States of America and also had the maximum share of world exports in the year 2013. Given the population base of 1.2 Billion people, the country also has a very large domestic market. The country has also one of the highest foreign exchange reserves in the world.
a)
Since China has the largest share of the world export in the year 2013 and this share is growing, its role in the world trading system is quite important for the following reasons:
• China's output of commodities and manufactured products such as steel, cement, automobiles, aluminum, ships and so on has a huge influence on the world demand and supply balance.
• Since China is also a large market for various commodities and manufactured products, the demand from within the country is quite significant. Any change in this demand would alter the demand and supply balance.
• Significant changes in the demand and supply balance would have an impact on global prices of these commodities and manufactured products. This in turn will impact countries who not only compete with China as suppliers of commodities and manufactured products but also consumers of commodities and manufactured products
Therefore, China has a huge influence on the world trading system.
b)
The Chinese currency is not a freely convertible currency and most economists have opined that China has deliberately kept its currency undervalued so that its exports are competitive and imports expensive. This helps China in building a huge foreign exchange reserve. Such a large amount of foreign exchange reserves depending on where they are deployed in the global financial markets may have a very large influence on the world monetary system.
c)
The business strategy of today's European and U.S. based global corporations need to factor the following in their business strategy:
• The location of the manufacturing unit in China not only offers a low cost competitive advantage but also gives access to a very large domestic market.
• Competitors who have their manufacturing units in China would be formidable in terms of cost competitiveness.
• Considering the logistics costs, the Asia Pacific region market can be served by a manufacturing unit located in China.
• China is also now becoming an innovation center for many products. The creativity and innovativeness of Chinese engineers and scientists can be tapped by being present in China.
d)
The Chinese production, consumption and exports of commodities and manufactured products will affect the global demand supply balance considerably.
Significant changes in the demand and supply balance would have an impact on global prices of these commodities and manufactured products. This in turn will impact countries that not only compete with China as suppliers of commodities and manufactured products but also consumers of commodities and manufactured products.
The data shows that already in the year 2013, China was the second largest economy after the United States of America and also had the maximum share of world exports in the year 2013. Given the population base of 1.2 Billion people, the country also has a very large domestic market. The country has also one of the highest foreign exchange reserves in the world.a)
Since China has the largest share of the world export in the year 2013 and this share is growing, its role in the world trading system is quite important for the following reasons:
• China's output of commodities and manufactured products such as steel, cement, automobiles, aluminum, ships and so on has a huge influence on the world demand and supply balance.
• Since China is also a large market for various commodities and manufactured products, the demand from within the country is quite significant. Any change in this demand would alter the demand and supply balance.
• Significant changes in the demand and supply balance would have an impact on global prices of these commodities and manufactured products. This in turn will impact countries who not only compete with China as suppliers of commodities and manufactured products but also consumers of commodities and manufactured products
Therefore, China has a huge influence on the world trading system.
b)
The Chinese currency is not a freely convertible currency and most economists have opined that China has deliberately kept its currency undervalued so that its exports are competitive and imports expensive. This helps China in building a huge foreign exchange reserve. Such a large amount of foreign exchange reserves depending on where they are deployed in the global financial markets may have a very large influence on the world monetary system.
c)
The business strategy of today's European and U.S. based global corporations need to factor the following in their business strategy:
• The location of the manufacturing unit in China not only offers a low cost competitive advantage but also gives access to a very large domestic market.
• Competitors who have their manufacturing units in China would be formidable in terms of cost competitiveness.
• Considering the logistics costs, the Asia Pacific region market can be served by a manufacturing unit located in China.
• China is also now becoming an innovation center for many products. The creativity and innovativeness of Chinese engineers and scientists can be tapped by being present in China.
d)
The Chinese production, consumption and exports of commodities and manufactured products will affect the global demand supply balance considerably.
Significant changes in the demand and supply balance would have an impact on global prices of these commodities and manufactured products. This in turn will impact countries that not only compete with China as suppliers of commodities and manufactured products but also consumers of commodities and manufactured products.
International Business 11th Edition by Charles Hill ,Tomas Hult
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
