NIC China Case Study

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China is the new `workshop of the world' and a 3rd
generation NIC
· Since the 1970s, there has been rapid economic growth
in China
· Sustained growth of up to 10% ­ one of the highest in
the world.
· In order to attract foreign industry in SE China, 14
`open' coastal cities and 5 Special Economic Zones were
set up.
· This encourage imports and exports by reducing tariffs as well as greater investment in education
and infrastructure
· There was a large amount of FDI for the bulk of the 21st Century
· Receiving up to $50 million per year.
· Labour was 80% cheaper in these areas
· In 2006 they received $63 billion, their highest recorded figure.
· China became part of the WTO meaning that trade went from just over $250 billion to just under
$1 trillion, almost quadrupling as they got greater access to global markets.
· Vastly increased global competition making it hard for western markets to export goods without
locating their labour in cheap markets to make costs effective.
· Chinas growth has increased the power it holds in the global economy, as many TNCs are based in
· China have challenged the power they hold in the negotiating rounds of the WTO and have
lobbied for better voting rights.
· This growth has increased wealth and improved living standards in China as well as supply cheap
labour so both Chinese and foreign firms invested in manufacturing in China
· Wider gap between the rich and the poor - much of the development has been in big cities along
China's coast, leaving the agricultural interior of the country relatively poor
· Deterioration of environment and use of natural resources - in 2003 it used 55% of the world
cement and relies heavily on fossil fuels to supply 70% of its manufacturing industry. The supply of
electricity was 5% slower than demand ­ electricity shortages in the south. Increased pollution
from traffic with investment in infrastructure and improved personal mobility
· For poorer nations the cheaper exports benefit as they can afford to invest in cheaper products
such as machinery to undergo industrialisation such as mechanisation of farming.
· The demand for raw materials from NICs in general including China creates a market for poor
producers enabling them to increase their exports to foreign markets, and their economy to expand
as a result.
· Many US and Mexican TNCs located in Mexico have moved to China in search of cheaper labour.
This has caused a decline in GDP and investment in Mexico with workers particularly the
secondary industry becoming jobless.


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