Cheng Siwei on economic globalization

Beijing(China)—Globalization has created enormous economic opportunities, but also increased the ferocity of competition. How should economic globalization be understood and dealt with? How do Chinese enterprises deal with these trends? Cheng Siwei, vice chairman of the National People’s Congress, China’s top legislative body, summarizes four major stages in the process of economic globalization.
Firstly, financial market connections are growing closer and closer. Financial globalization is incompatible with economic globalization. World financial globalization means world currency can only be measured by its purchasing power after breaking away from the gold standard. The exchange rate in various countries has become a policy tool for competition. World capital floats much faster than before. According to data from the Bank for International Settlements, in 2005 the surplus value of the world’s financial products reached 325 trillion dollars, about 7 times the world’s GDP. The scale of world finance has expanded while the world financial market are so heavily interdependent that no matter where there is a problem, shockwaves are felt everywhere.
Secondly, a knowledge economy has become the foundation of globalization. Such an economy is based on knowledge; it is the major element in the industrial mix. The knowledge economy plays an important role but China still relies primarily on investment to drive economic growth. Knowledge is also significant in production; management has become the “software” of production as it is responsible for the organization and optimization of labor and machinery.
Thirdly, information technology has become a precondition of development. Cheng Siwei says information technology has made regional distances smaller and improved efficiency in terms of time. Information technology will play an important role in enterprise management in the 21st century.
Finally, economic globalization is based on multinational corporations. Multinational companies are the leaders of economic globalization. The behavior of some corporations, such as intervening in countries’ internal affairs, influencing the local economy or evading taxes has been criticized, but most try hard to regulate their company at all levels.
Cheng Siwei says that in terms of world economic development, most countries go through four stages: trade in raw materials, trade in ready products, capital exports and knowledge exports. The biggest gap now between China and developed nations is knowledge. Due to lack of independent innovation and original patents, China’s reliance on western technology is high. “Currently only half of the products we make were invented or created in China. We rely on imported technology for the other half,” he said.

—Daily Mail, People’s Daily news exchange item