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China and India: Re-emerging Economies

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Global Strategy I: How The Global Economy Works

Universidad de Illinois en Urbana-Champaign

4.9 (62 calificaciones) | 2.9K estudiantes inscritos

Curso 3 de 7 en Global Challenges in Business Programa Especializado

Starting in the late 1990s, “globalization” became a buzzword to describe the apparent integration of markets in the world economy. Many authors and pundits claimed that the world was converging towards a market-friendly democratic place, while gurus and consulting firms were not short of formulae and advice on how to make profits out of the global economy. Decades later, new realities show that globalization does not mean political, cultural, and economic convergence and that forces against it are strong. This course seeks to help you understand the forces of globalization and how cross-cultural management and the relationship of a multinational organization to various host countries is becoming more and more critical in today’s global economy. This course begins with the discussion of these issues and global relationships and delves into a deeper understanding of business strategy in today’s global business marketplace. Upon successful completion of this course, you will be able to: • Understand how we got here and why it matters • Understand the complexities of the current globalization (not all countries are the same) • Evaluate the effects of international trade regulations on international business • Evaluate when and why should we operate as multinationals This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

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De la lección

Module 1: How Did We Get Here? Why Does It Matter?

The current global world is not unique nor is it stable. The world has been more globally integrated in the past than in the present times. Many emerging economies are actually re-emerging from a not-so-distant past when they dominated the global economy. An understanding of these processes will allow us to conduct sophisticated analyses of the global economy that take into account political and economic issues as well as historical processes.

China and India: Re-emerging Economies7:36

Impartido por:

Marcelo Bucheli
Associate Professor

Transcripción

[SOUND] In

our previous session, we talked about the emerging economies as ones

that increase their importance in the global economy.

And the media has been talking a lot about China and

India as the quintessential examples of these emerging economies.

[MUSIC]

Now when we study the role in the economy,

there is something that we need to take into consideration.

And that is that maybe we should not even call them emerging economies but

re-emerging economies.

And let me explain you why.

China and India have been important in the world economy for a long time.

Take India, for instance.

By the late 18th Century, when the British were going through their industrial

revolution, the manufacturing output of India was higher than that of Britain.

So, India was actually a bigger

manufacturing economy in the times of the industrial revolution that is shown,

usually, as a quintessential example of the rise of the West.

And take China, by the year of 1800 it represented half of the world economy.

So these two countries were powerful.

They were major players in the economy and their importance unfortunately decreased.

But this does not mean that they did not know

how to participate either in manufacturing or trade in the world economy.

And we're going to explain this evolution.

So if India and China were important, what happened?

Why did they lose importance in the world economy?

This is a very complex process that

we're not going to explain in detail in this class.

But some elements are worth mentioning to, again,

understand the importance of these two countries.

India, as mentioned earlier, used to be a bigger manufacturing

power than Britain, in the times of the British Industrial Revolution.

Afterwards, fortunately for India, India became a British colony and

manufacturing efforts were discouraged by the British.

The British actually tried to de-industrialize India in order to turn it

into a market for British manufacturing output.

Now, what is the case of China?

China, we have this combination of isolationist policies by the Chinese

emperors that later on led to a series of defeats against Western powers.

In things like the Opium War in the 19th Century that led their Western

powers to dominate the Indian economy and control important segments of it.

Later on, China faced other complicated challenges such as,

well, World War II that had terrible effects in terms of destruction and

killing of a lot of people, which was followed by the Revolution that, again,

was a very bloody war that destroyed a lot of the potential of the Chinese economy.

By the 1960s,

we have a China that after going through processes like the Cultural Revolution,

we find a country that did not represent more than 2% of the world economy.

An economy that in the year of 1800 was 50% of the world economy

went down all the way to 2%, even though it had 25% of the world's population.

So this was something that remained like this until the decade of the 1970s.

During that period, the Chinese Communist Party embarked in a series of economic

reforms that shifted the communist model towards a market economy that encouraged

foreign direct investment, the creation of domestic private corporations in China,

which eventually led to our reemergence of China in the world scene.

So China was not important for a while, but it was a very short

period of time for the standards of Chinese history.

They count their history in terms of 5,000 years ago.

So this was just a small parentheses, and China is back.

Now what about India?

India, as I mentioned before,

was part of the British empire for a while, and

it got its independence in the year of 1948.

Later on, India adopted a highly protectionist model that

was characterized by its very rigid bureaucratic system

that discouraged the creation of new enterprises.

And at the same time,

the model discouraged the arrival of foreign multinationals.

By the early 1990s, the Indians shifted this model.

And adopted a more market-friendly economic system that opened doors to

foreign investors who could take advantage of several of the Indian advantages.

Mainly, the existence of a highly educated labor force

that worked for lower prices than the western labor force.

So this is something, well, in the case of India,

and the exploitation or the use of cheap labor in China and other resources

existing in China, led to these two countries to reemerge in the world scene.

And this is why we have them present again.

But the point here is, it is not that they're learning

how to behave or how to operate in the world economy.

These two countries are just back and they're, again,

major protagonists in the global economy.

So to summarize here, we have been talking a lot about in the last years,

we've been talking about the emerging economies.

And yeah, some of them have emerged after years of poverty.

But some others, like the major players such as India and

China, are re-emerging.

And they're exploiting all the resources that they have in order to compete

in the world scene.

So, this is changing the landscape.

And this has changed the landscape of the world economy

in a way that has affected all the rest of the countries of the world.

Some historians have said the emergence of China in the 1970s and

80s is the most important historical event in the world since

the arrival of Christopher Columbus to the Americas in 1492.

Whatever happens in China affects us all.

And therefore, these guys are not just coming back, but

they're coming in full force.

[MUSIC]

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