The reforms implemented under Deng Xiaoping in 1978 aimed to liberalize and open China's economy to the global market in order to stimulate growth after years of stagnation. Special Economic Zones were established along coastal provinces to incentivize foreign investment and trade. These reforms led to explosive economic growth averaging 10% for over two decades, lifting hundreds of millions out of poverty. However, globalization has also increased inequality between rural and urban areas and exacerbated environmental degradation problems in China. While economic growth has benefited from opening to global markets, China now faces challenges in transitioning to sustainable growth driven by domestic consumption as it loses manufacturing jobs to cheaper labor abroad.

1. Succeeding a long period of economic stagnation hallmarked
by the deaths of 45 million, the new Deng Xiaoping government
(1978-92) emerged with the aim to ‘fix’ a floundering economy.
The Gǎigé kāifàng 1978 policies, a series of liberalising and
globalising reforms were implemented with the intention of
exporting China’s immense manufacturing potential to the
world. Along with effective agricultural liberalisation, a number
of ‘Special Economic Zones’ (SEZs) were established in coastal
provinces, incentivising foreign investment and greater trade
dependence for economic activity. Globalisation can be defined
as the process of increased integration between different
countries and economies and the increased impact of
international influences on all aspects of life.
This agricultural liberalisation allowed for the reversion of rural
stagnation and unemployment, while the creation of globally
interdependent zones formed the new engines for growth in the
regeared Chinese economy. Defining economic growth as
increasing goods and services produced per head over a period
of time - The results of these reforms were immediate,
kickstarting growth and prompting a 10% average for more than
two decades, largely as a result of the increased efficiency from
liberalisation, the impacts of urbanisation and industrialisation
and the benefits of access to a global market.
Perhaps more importantly is the resultant economic
development of China - defined as the promotion of standard of
living and economic health of a specific area. Resulting from
high economic growth and subsequent increases in
employment and wages, 400 million people have been brought
above the $1 per day poverty line. While China has had a low
base to develop from, growth has meant that China’s Human
Development Index (based off life expectancy at birth, mean
years of schooling and GNI per capita, with the intention that
these indicators correlate to others) has increased from 0.268
to 0.719 to put it 91st.
While economic development has been boosted by foreign
finances, the non quantitative factors of globalisation such as
the spread of knowledge from cultural interaction have had a

2. significant benefit, for example spread of western capitalist
views on spending and consumption, helping a new middle
class emerge and utilise their wealth to raise standards of living.
Likewise, this new middle class has begun to drive political
action, prompting reforms in social welfare and environmental
policy. Globalisation has been largely good for Chinese
economic development, though there is still significant progress
to be made, particularly in rural areas.
Despite the positive impacts of globalisation, there are many
who have not felt the benefits. Wealth generated has not been
spread equally, and prevalent inequality within the country is
detrimental to both net quality of life outcomes and growth
potential. China’s traditional policy on inequality has been the
belief that by generating growth, living standards will rise in
rural areas as well, though this serves to widen inequality. The
introduction of SEZs saw large quantities of labour urbanising,
gravitating towards higher wages, resulting in brain drain from
rural provinces, and a difference of $1,000 GDP per capita in
provinces like Tibet to $16,000 in Zhejiang due to differences in
labour efficiency between rural and urban regions.
Moreover, barriers to migration within the country such as the
hukou land title system which determines social welfare
benefits based on place of origin rather than residence means
inefficient resource allocation. As a result, China’s Gini indexis
still only 42.1, placing it 100th. Furthermore, unemployment,
though sharply dropping after the Gǎigé kāifàng reforms has
since risen to 8% in unofficial estimates. Firstly, the decreased
relevance and efficiency of State Owned Enterprises in newly
liberalised markets, has triggered impending release of workers
a la the 1996 reforms seeing 36 million layoffs.
Secondly, the movement of investment to countries with now
cheaper labour, means China will lose manufacturing jobs to
countries on the subcontinent. Further, there is significant
unemployment in rural regions, with 5% lower employment than
urban areas. In examining the impacts of globalisation on living
standards, though impacts have been profound everywhere,
benefits have gone more to urbanites.

3. On the point of growth, considering the impacts of an ageing
population and a dwindling labour supply, compounded by the
movement of investment to those countries with cheaper labour,
Xi Jinping’s government is focusing on generating growth by
substituting foreign investment for domestic consumption,
stating they are willing to sacrifice high growth rates during the
restructuring process. Because of China’s dependence on
Foreign Direct Investment for growth, it is beholden to the
animal spirits of foreign investors, which has recently been
detrimental as seen by the 4% drop in growth during the GFC
following a pattern of declining growth. With pessimistic
forecasts clocking in at 3-4% for coming years, China’s
economic growth has benefited significantly from globalisation,
however will need the restructuring reforms to significantly buoy
growth to stay high.
Finally, the most obvious issue caused by globalisation has
been environmental. Following the global tradition of “grow first,
clean later”, China is now feeling domestic economic and
external political pressures to begin to meet environmental
responsibilities. Environmental issues in China are twofold.
Firstly, China faces resource depletion, for example, exhaustion
of grasslands and forests may require China to import forestry
products in the future. Secondly, pollutants emitted have
resulted in rising health risks, with the 2007 OECD report
finding it will cause 600k premature deaths and 20m cases of
respiratory illness by 2020.
Moreover, there may be up to 13% of GDP lost as a result of
pollution, with 7% already being lost in 2007.
In response, premier Li Keqiang has declared a ‘war’ on
pollution, so far involving new environmental policy coming into
action at the beginning of next year, including property seizure
and prison sentences if executives of companies do not meet
environmental control targets.With the morbidity of current

4. forecasts, the Chinese government will have to do a lot to tackle
their growing environmental concerns.
In assessing the impact of globalisation on the Chinese
economy, outcomes can be distilled down to a dichotomy of the
good: explosive economic growth resulting in significant
economic development, higher living standards and rising
wages, as well as generally higher employment and the bad:
environmental sustainability is at an extremely poor standard
and growing inequality can be observed. In this view, the
benefits clearly outweigh the negatives due to the net gain to
standards of living for the majority of the populace.
However in truly assessing the impacts, the future of Chinese
growth must be considered. On the point of future growth,
China has an advantage over other economies in that it still has
underutilised resources in rural areas, and if this lack of
efficiency is rectified it may hold the potential for high levels of
future growth. Any structural reformation however, must all
occur at the same time as China’s growth slows anyway, for
reasons previously highlighted, in conjunction with loss of
growth due to environmental degradation. Thus, on the future
impacts of globalisation, the effectiveness of China’s ability to
switch to a consumption driven economy will be paramount in
determining future growth rates, and indeed, China’s economic
future.