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Globalisation Stimulus Material

Terms in this set (57)

- China's growth has come from its huge exports to the rest of the world.
- Both countries have an absolute advantage based on low labour costs.
- Globalisation and trade have worked for both these countries as exports are an injection into the circular flow, creating increased AD, jobs and economic growth.
- The supply side policies of education etc. have helped increase the potential size of their economy and YES continued the growth.
- Raw materials - China has a great wealth of natural resources, having vast reserves of coal, oil and natural gas. These are being used to fuel the industrial development of the country. However, so large is the country's requirement for raw materials to feed its manufacturing industries, that it is a major importer of oil, gas, coal, iron-ore, copper and other key commodities in world trade.
- Education - Literacy levels of China have risen dramatically over the past 20 years. More human capital and more skilled workers means increased productivity, lower average costs, increased output and increased GDP.
- investing labour and capital in innovation so that it can sustain its economic growth and reduce the risk involved in having a narrow economic base (improve the efficiency of the goods and services produced).
- If workers demand higher wages, there are many more who will take the jobs available. Wages in other East Asian countries earn up to 10 times more than Chinese workers. This has increased profit margins and attracted inward FDI (Foreign Direct Investment) as American, European and Japanese companies open factories under licence in China.
- increasingly intricate and higher quality technology are more labour intensive to contsruct so manufacturers relocate to countries with lower labour costs
- Competitiveness is the ability of a country to compete successfully internationally and maintain improvements in real output and wealth.
- Improving education is a large part of increasing competitiveness.
- This is because education gives people a wider range of developed transferable skills. The workforce will become more efficient and will be able to produce more.
- When the productive capacity of a firm is increased, the output increases, and average costs fall. By achieving economies of scale, firms are able to lower prices, which makes them more internationally competitive.
- However, this is not guaranteed, as some people can be trained in the wrong thing. This results in them becoming unemployed as they are not able to use their skills. If an entire industry declines, all the people who have higher education in that field, this will cause structural unemployment.
- This limits economic growth and reduces the productive capacity of the economy, which reduces competitiveness. In order to prevent this, the government could introduce training schemes that give all workers a wider range of transferable skills which will enable them to work in several industries, and would improve their skill set, making them more productive.
- Productivity levels are another key part of increasing competitiveness. A more productive workforce would produce more output for the same costs, which would cause lower average costs, and so this results in economies of scale. When a firm achieves economies of scale, they have the ability to lower prices, and this enables the economy to become more competitive. Cheaper goods will be more competitive against foreign goods