How China exemplifies the double edged sword of globalisation

A large number of Western workers feel their livelihoods have disappeared because of globalisation, but their true interests lie in the embracing of change

PUBLISHED : Tuesday, 21 June, 2016, 2:53pm
UPDATED : Tuesday, 21 June, 2016, 2:53pm

It might seem bizarre to mention Dreamworks’ Kung Fu Panda alongside the political platform of US Presidential hopeful Donald Trump but both actually represent a different facet of globalisation.

Similarly, Marvel superhero Iron Man could be juxtaposed with German Chancellor Angela Merkel’s qualms about Chinese steel production as expressed in her recent visit to Beijing.

Even China’s appetite for pork can be coupled with the imminent British referendum on membership of the European Union (EU).

In each case the first set of examples exemplify a way in which Western companies and agriculturists have tapped into rising affluence in China, in part a consequence of globalisation, to create a profitable market for Western products.

The latter three examples reflect, to varying degrees, the fact that globalisation, which by definition has involved the transfer of some jobs to lower-cost manufacturing centres including China, has had a detrimental impact on the employment prospects of many in the West.

Rising disposable income in China underscores international accounting firm PwC’s estimate that China’s cinema box office spending will surpass that of the United States in 2017, topping US$10.3 billion and rise to US$15 billion in 2020.

Hollywood filmmakers have already made the conscious decision to tailor some of their cinematic offerings to a Chinese audience. That’s where Kung Fu Panda comes into the picture.

But Hollywood has long understood that monetisation of their movies can also be enhanced by selective product placement. The prominence of a Chinese milk drink in Iron Man 3 might not have added much to the plot for mainland cinema-goers in 2013 but it served a commercial purpose.

While Hollywood has worked out that there’s good money to be made in China, so too have US farmers. Rises in Chinese consumers’ disposable income allows a move up “the protein chain”, and greater expenditure on foods that were previously less affordable.

Thus, China’s immense and still-expanding appetite for pork has been a major source of revenue for farmers in Europe and the United States who have successfully satisfied that demand.

But on the other side of the globalisation coin, rightly or wrongly, many workers in Western economies do feel their own prospects have suffered as a consequence of China’s economic emergence and that frustration is seeking an outlet.

US Presidential candidate Donald Trump has adeptly tapped into this disquiet, and his message clearly resonates with a sizeable proportion of the electorate. Indeed, even if Trump fails to win the White House, the fact that his platform is proving attractive to many voters will surely have some influence on US policymaking, even on his opponent Hillary Clinton.

That may already be evident. China’s “Great Wall of Protectionism uses unlawful tariff and non-tariff barriers to keep American companies out of China and to tilt the playing field in their favour”, is the Trump camp’s position but Clinton herself said in April that the “next president has to understand the games Beijing plays and be prepared to stop it”.

Talking tough on China transcends party differences in this US presidential election as both sides grasp the fact that a significant proportion of the electorate feels badly-served by globalisation, a process that they see others, notably China, as having disproportionately benefited from.

Some analysts can even see links between the impact of globalisation as a whole and the possibility that Britain may vote to leave the EU, the so-called Brexit.

“Distant observers should understand that Brexit is not just about the idiosyncrasies of the Brits, but more about globalisation and the structural flaws of the EU. It is a struggle between the populace and the establishment, similar to the US presidential elections,” wrote Stephen Li Jen, of London-based SLJ Macro Partners, on June 6.

As for the European Union itself, Germany’s Chancellor Angela Merkel, visiting Beijing last week, was forced to address broader EU concerns that cheap steel exports from China have had a markedly adverse impact on Europe’s own steelmaking industries.

No doubt China and the EU will find a solution to this issue but the answer does not lie in trying to turn back the tide of globalisation.

No one should underestimate the frustration of large numbers of Western workers who feel that their livelihoods have disappeared because of globalisation.

But their true interests surely lie not in trying to turn back the clock but in the embracing of change. The increasingly affluent Chinese consumer has money to spend. The West’s challenge is to create the jobs to make the products to satisfy that demand.

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