Reading Assignment 4: Economic Globalization---HAO JINGYU

What is the relationship between the economy and globalization?

1)  To sum up:

Deacon inherited Griffin's work to some extent. The economist Peter Deacon defined the cross-border extension of economic activity as economic globalization. Its scope and depth are largely driven by two mechanisms: first, the space to expand markets through trade. The internal structure of multinational enterprises is then changed through the expansion of foreign direct investment, followed by intra-group trade between enterprises in the same group (for example, global group heads and foreign subsidiaries). The method of industrial cluster upgrading should be sought from the global background. In the financial sector, economic globalization is reflected in the increased integration of international financial markets, namely, a significant increase in the level of cross-border investment, capital flows, foreign loans and joint ventures. Economic globalization thus manifests itself in increased capital flows, transnational flows of goods and services, moves towards global markets and the disintegration of national borders.

2) Interesting points:

Differences between countries are no longer the only consideration; even similar countries will participate in and benefit from trade. The endowments and expertise of each country are incorporated into economies of scale, increasing productivity and expanding the incentives for international trade. In addition to economies of scale, geographical proximity is another key element of the new trade theory.

The concept of global value chains is based on an understanding of why trade happens, how it happens, and the resulting effects. As the new trade theory recognises, even within a country or industry, businesses can operate in very different ways. Among them, the biggest difference lies in how enterprises integrate into the global value chain, whether they produce intermediate products themselves or purchase them from outside the company, which we cannot know. What is clear, however, is that GVCS can be seen as an important way for firms to improve their competitiveness. In addition, for scholars, global value chains can help understand how enterprises achieve global production and operation in the context of economic globalization.

Under the general trend of economic globalization, global value chain in its simplest form describes all the activities required from conceptual design to different stages of production (including physical transformation and input of various producer services), delivery to the final consumer and final disposal after use. The conventional wisdom in the international business literature is that Mnes develop sequentially, starting with a dominant position in the domestic market and only where they are dominant

After that, they will go overseas. The order usually determined is as follows. First, overseas markets are served by direct exports, often using local independent sales agents. Second, as local demand grows, multinationals may want to strengthen their grip on foreign markets by establishing their own overseas sales outlets. This can be done by building a brand new (greenfield) facility or by acquiring a local company (perhaps the previously used sales agent itself). Acquisitions offer the appeal of an already functioning business compared with the more difficult and potentially risky approach of starting from scratch in an unfamiliar environment. Eventually, the need for a truly foreign production facility may, though not inevitably, be felt. Again, this can be done through greenfield investments or acquisitions

3) Discussion Points:

Can the state support and sustain the costs of economic globalization in the long run? The development prospect of economic globalization is getting better and better, but can its safety factor be guaranteed? When will most people feel the benefits of economic globalization?