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China and Indian Challenges to U.S. managers in the formulation of global strategy
Chapter 1: Abstract
This document will focus on evaluating the challenges that threaten the global economy in relation to China and India economies. Research will also involve analysis of the China's and India's economies, and their influence to the global market. Similarly, an analysis of the strategic elements will be done to enable proper environment for U.S global managers to maintain a competitive advantage against such challenges. In addition, research will involve global manager's efforts to find solutions to such challenges in the future (Shiozwa, 2007)
Chapter 2: Introduction
As the world moves deeper into the global economy, global or international managers are experiencing major challenges. International market environment has been observed to be transforming continually. At the same time, India and China economies have demonstrated threats to the international market due to challenges they have posed to the global market. Organizations or companies have been forced to form strategies that can assist them predict the future outcomes of the global economy (Liu, 2003). Application of such strategies will facilitate maintenance of a competitive advantage. For an international manager to succeed, identity of the challenges posed will be necessary since company resources will be directed towards navigating such global economic challenges.
Chapter 3: Literature review
United States seems to be more comfortable with India's rise than that of China. Quadrennial Defense Review (i.e. QDR) of fiscal 2010 made recognition of a global affair which is more influential to India with Indian Ocean region inclusion. China's decision making processes plus military development has posed a threat to the U.S global managers. India and China are the two conventional wars that U.S is fighting besides terrorism threat. China and India economies have proved to be potent in shaping the international system in the future. US has formulated a new strategy review to deal with the India's increase in terms of political influence and cultural reach. However, the increasing influence plus democratic values which are shared with the U.S, an open political system and global stability will allow for more opportunities in cooperation. India's military capabilities have been improving rapidly with time due to high acquisition of defense such as long-range surveillance for the maritime (Koo & Dong, 2002). As these capabilities improve, Asia will benefit from India's contribution as a security net provider within the environment of Indian Ocean and beyond. Global strategic landscape evolution is being driven by the Chinas growing influence in global or regional and the security affairs. Deficiency of transparency within Chinas military development or processes of decision making has raised legitimate queries on its operation and intentions.
China's economy influence on global trade
China's economy consists of 10percent of the U.S economy, 20percent of Japan's economy and 90percent of the Italy's economy. Adjustments of disparities of the purchasing power revealed that China's economy is a half as large as the United States economy. This indicates that China is the second largest economy globally. In addition the economy of China is growing and expanding at a very high rate. China became World Trade Organization (i.e. WTO) member in 2001 which gave the economy an opportunity and opening for trade. China reduced its average tariff rates from 16.7% to 12%in 2002 as part of WTO joint agreement. China is also aiming at reducing the number of goods under import quota or license. The economy is also planning to liberalize foreign investment in insurance, banking, retail trade or wholesale, financial services, construction, asset management, tourism and telecommunications (Brainard, 2010). Access of China to WTO means that China will have reduced Chinese trade protectionism hence larger markets to China neighbors. Reduced production costs as a result of WTO opening will enable China to attract foreign investment more than other Asian countries. For example, Southeast Asian Association (i.e. ASEAN) and Japans reduction of its direct investments in ASEAN nations has assisted China to open up markets to ASEAN while running trade deficits together with them.
Increased China's economic integration with the southern neighbors has facilitated sensitization of all parties to more integration. Regional leaders declared that China's trade agreement with the ASEAN nations is predictable within a period of 10years. Similarly, mainland China and Taiwan are economically integrating Taiwan's direct investment to mainland China has been seen to be increasing at a rapid rate despite the country's slow pace in uplifting the political hurdles. As a matter of fact, traditionally, Taiwanese industry heavy dependency on Japanese industry has resulted into severe suffering due to a stagnation of Japan plus the slow down of the global high-tech. More open markets in China will allow South Korea to experience an increase in sales volume within China. According to analysts, the emergence of China as an economic power may prompt an emergence of free trade agreement between Japan and Korea, while none of them is a member of ASEAN. However, no matter how Korea may try to balance its political and economic relations with China, U.S and Japan, the influence of China within Korea's economy will continue to grow while china's economy expands. Similarly, Korea's pressure to maintain technological advantage to China will probably increase while China advances technologically (Khan & Hu, 1997).
India's economic influence on global market
India has been observed to have a growing influence to the global affairs. For this reason, U.S has given it the mandate to be a net security provider within the Indian Ocean and beyond as a result of its advanced military capabilities. Distribution of global economic, political and military power has been shifting and appearing more diffuse. India's rise as the worlds largest democracy will go on reshaping the international system. This was as in accordance to report by Quadrennial Defense Review (i.e. QDR) which was released by the U.S secretary for defense, Robert Gates (Bradsher, 2008). For US to continue remaining as the most powerful actor within the global economy it's necessary for it to continue cooperating with its partners and allies so as to build and develop as well sustain security and peace. America's interest has been in integrating the rising powers fully. India's increase in terms of cultural, political and economic power influence is causing the country to be more influential on the role of global affairs. Opportunities for cooperation are evident due to India's democratic value and growing influence which are shred with the United States. Similarly, an open political system in addition to global stability commitment is also opportunity for cooperation.
Defense acquisition increase in India has facilitated improvements to its military capabilities. Defense acquisition referred here includes maritime interdiction, maritime surveillance, patrolling, strategic airlift, or air interdiction. Already, India has established global military influence via counter piracy, humanitarian assistance, peacekeeping, and efforts of disaster relief. India's has invested into efforts in fresh life breadth towards global trade talks since New Delhi has had attempts in stamping its authority towards global economic stage. After earlier talks had failed concerning sharp agreement among New Delhi, United States and China, India is trying to break the dreadlock. Disagreement was on mechanism of special safeguard so as to shield poor farmers from surge imports which had depressing prices. Similarly, this attempts are aimed at deflecting blame for possibilities of WTO's Dona round collapse.. However, India's globalizing economy is offering a growing interest in witnessing that deal go through. India has secured a place in the global economy due to its population size and the size of its economy (Bradsher, 2008)
Chapter 4: Research findings and discussions
Challenges of China and India to the Global economy: Strategic elements applications
China and India's economies have posed a great danger to the order of the global economy. However, there is need for the global managers to apply strategic elements in fighting such challenges. Seemingly, China has grown to be an economic superpower. China has been rated to be the 2nd largest economy and 2nd largest exporter in the world. China's economy holds by far the current world's largest surplus account and the foreign exchange reserves. For example, in 2006, the real GDP was around 13times the 1978 level when economic reforms were initiated by Deng Xiaoping. Deep integration to the world's economy has been associated with China hence the dramatic expansion of China's economy has powerful effects on the other parts of the world. Global managers in the U.S can invest heavily and strengthen the higher education, workforce training and basic research. U.S technology should be applied in global fight against ignorance and poverty. Additionally, U.S global leaders can engage efforts to reclaim the position of U.S as the scientists, students, technologists, and premier business destination worldwide. Such actions would reduce barriers in trade, human capital exchange and investment. Such considerations ought to be by all managers seeking global expansion opportunities. Observations have revealed China's rise to facilitate other economic superpowers. Despite China's impacts on the global economy being discussed with that of India, they cannot be compared. Explanation to this can be linked to the fact that India's GDP has been less by half to that of China. Annual trade growth of China exceeds India's total trade levels (Mansingh, 2008). Similarly, China has more direct investment which are foreign than India has had since 60years ago when it gained its independence. However, currently India is developing in a dramatic way and may surpass China but China will tend to retain the Asian neighbors in the future. Nevertheless, U.S can apply strategic elements such as a continuous development or building strategic ties with India. U.S should encourage India to assume a more active economic and political role within the region
In addition, Japan has signaled to be the next potential global economic superpower contender. Japanese competitive prowess resulted to widespread perceptions of it being rated number one. However, its economic transactions plus trade with the rest part of the world remained as a limited share of its economy relatively. Also, the Japanese financial markets did not liberalize to an extent of enabling the yen to serve an important role internationally. Japanese economy thereby collapsed throughout the entire decade of 1990s while at the same time its population is declining. Japanese economy has therefore lost its regional dominance to China. China therefore poses a main challenge to the U.S due to its newly acquired global economic superpower. With such increasing powers, international order is disturbed and the security is also triggered hence rise of economic conflicts (Heaton, 2008). Complications of the challenge are facilitated by the historical background, where China has not been a democracy yet. As a strategy, Washington should go on seeking robust military to another relationship with New Delhi as a strategy element. Such relationships will promote defense trade ties (Anders, 2007). Similarly, Washington should develop Asian regular and formal dialogues on developments within the border with India. Encouragement of India in permanent involvement in strategic initiatives which are value based such as trilateral dialogue. Determination that the China's economy has emulated towards becoming a country with successful high income without authoritarian political system reforms has been the greatest global challenge. China has shown likelihood that it will never accept systematic responsibilities which are normally associated to the superpower status.
Similarly, China has posed significant security challenges. Time has revealed China to be expanding and modernizing its military capacity at a rapid rate. However, this expansion cannot equate that of the U.S on global basis. Chinas forces have had capabilities of wider projections and predictions are that they soon will operate outside their region. Economic success of China has been expanding the nation's abilities in support and deployment of more military assets at a very high speed hence posing a potential threat to the world economy. The economy has remained a nuclear power consisting of delivery systems able to reach some parts of the U.S. In addition, China has challenged the existing international norms in relation to self determination, labor standards, nonproliferation and human rights among others. Economic domain has revealed that China principally adheres to the norms but in practice the country deviates. Evidence of this is seen in China's cooperation with those countries known to violate those international norms such as Iran on proliferation of nuclear and Burma in relation to human rights. Global order is therefore incapacitated to deal or address such shortcomings. Such challenges can be fought through strategically reached close coordination on Southeast and South Asia plus increased mutual confidence between US and India in relation to each others regional strategic intentions. For example, U.S should encourage India to help Afghanistan developments into stable democracy. This can be done through encouraging India to assist to strengthen democratic institutions within Afghanistan hence deepening US-India exchanges in Afghanistan developments. US can also assist strengthen India's cooperative activities (Cohen et al, 2005).
China has also posed a systematic challenge due to the fact that the country has revealed discomforts with the international economic system currently. China wants to be welcomed to the global world as well be given a post at the top. For example, in 2008 China was bold to harshly and publicly criticize the U.S for own shortcomings on world economy management. In particular, this was specifically on regulatory regime in prevention of global financial crisis, steady dollar fall which facilitated rise in oil and other good prices in addition to the alleged discriminatory rules contrary to the incoming foreign investments (Amadeo, 2008). In economic interactions with other countries China has been pursuing conflicting strategies to the rules, norms or institutional arrangements which are responsible for global order.
Trade challenge is also another problem that global economic managers have to deal with. China has been playing a passive and a disruptive role in relation to global system. In 2008, hoarding of foreign currency went beyond 1.8trillion dollars despite the continuous Chinese population low incomes. Global economy has therefore been under substantial pressure. China's surplus originates from massive foreign exchange markets interventions in prevention of China's currency appreciation. Rights have been accorded to China in pegging their currency under the rules of IMF, but no rights for massive interventions within the foreign exchange markets. On trade policy, China does not hide preferences of politically motivated bilateral, low quality or even regional arrangements with personal trading partners (Brainard, 2010). Global managers can strategically link domestic and international policies which are currently being treated separately. Policy of federal immigration for example, encourages overseas students within prioritized filed to retain their citizenship after the graduation through being given access to permanent residence.
China has also posed a challenge to the international monetary system order. Facilitation of this has been China rejection to adopt a policy of flexible exchange rate which would promote balance of payments adjustments position. As matter of fact, China has intervened at a massive rate within the currency market in maintenance of a substantial undervalued rate of exchange. As a result of this, huge current account and trade surpluses have been evident and are counterparts of United States current account and trade deficits (Richelson, 1999). Imbalances of such kind plus the unprecedented international funds flow would trigger dollar crash at any time thereby affecting the global economy and the current financial crisis compounding it. China's search for oil supply sources that are assured has been another challenge that global managers will have to address.
Actions of China to carry out such a search will result to increased global oil production or gas. With such, upward pressures of the prices will alleviate and there maybe possible shortages. Predictions that China will be the worlds largest energy consumer in the near future has contributed to dramatic oil price rise in the past 5years. To fight such energy crisis, US can assist strengthen India's cooperative activities with the Agency of International Energy so as to coordinate response mechanisms just in case of oil emergency. Since U.S hold a major stake in relation to how India deals with increased energy shortage and how competition with China is pursued for energy resources. U.S should therefore work closely with India during the development of its strategic reserves of oil. Such actions ensure that the main energy consuming nations are well prepared to cooperate in resolving any potential energy crisis globally (Sodhi, 2008).
India's development as an economic power has posed challenges to the U.S global economy. Investor risk has been promoted due to turmoil pervasiveness. Financial sector risks have been on the higher rank and the problems have started to spill towards the real sector. As a strategic element, US must avoid any potential military conflict with India-China concerning unresolved issues of the border since US concern is to facilitate stability within the region. Washington should watch the ongoing border talks at a close range without any mediation. In future, there is likelihood that there will be a breakthrough in China India discussions. However, Washington must keep at watch those talks to identify any tension signs that maybe ratcheting upward (Carter, 2001).
In 2008, the United States experienced an aggressive support from the monetary and fiscal easing. Similarly, non financial sector entered the period of financial turbulence with high profits margins and high profits together with a low leverage. Before gradual recovery takes place, global growth will continue slowing down (Malik, 2007). Consumers and business enterprises have experienced deterioration while industrial activities have slowed down. Such occurrences have demonstrated tighter credit conditions, negative impacts on exports plus weaker global growth. Disposable incomes have been undercut due to high oil and food prices and financial strains are limiting investments. Experiences of housing markets have been evident and increasing, thereby dragging domestic demand within several European countries such as Spain, United Kingdom or Ireland. Closer collaborations with India concerning initiatives purposed to strengthen economic development or democratic trends within the region should be applied as a strategy. Working with India would facilitate counter attacking any of Chinese moves which would act as a claw back to such trends so as to ensure democratic, peaceful development of Southeast Asia and South Asia.
Lastly, China is challenge to the foreign aid since it has become a main donor. Challenges have been posed to the prevailing norms due to ignorance of the existing conditions. Apart from rejecting social conditions the country has also overlooked the prevailing economic criteria such as poverty alleviation or good governance. China's conditions have been somehow political in that they insist that recipient countries must support global issues positions of China within the United Nations or elsewhere. Such countries must also funnel their own primary products to China's reliable suppliers. China's deviation from the global norms has posed a threat since their recipients get an escape from the western conditionality which is despised. Such an escape is both politically satisfying and financially satisfying. U.S should engage dialogues which would promote democracy, economic freedom, counterterrorism and Asian developments. Trilateral agendas among Japan, US and Australia should continue to facilitate trilateral initiatives particularly in the areas of maritime cooperation and energy (Koo & Dong, 2002).
Chapter 6: Recommendations
Global managers however need to invest heavily on acquiring a competitive advantage for the United States. On the lower side, there is greater need to engage the public on issues of global economy. Firstly, global managers in U.S can invest heavily and strengthen higher education, workforce training and basic research. U.S technology should be applied in global fight against ignorance and poverty. United States will be positioned to be the indispensable hub of global business emergence plus technological networks, ultimately providing competitive measures and productivity (Rifkin, 2006).
When the U.S economy creates extra wealth, extra resources will be available to facilitate high wages, more savings, higher shareholder returns, extra investments, higher living standards and better government services. On the other hand, reduced productivity will result to weaker competitiveness, reduced services and reduced resources. Similarly, global managers should ensure U.S citizens are availed with additional graduate partnerships in science and mathematics and particularly engineering or physical sciences. Priorities in economic security, high risk research or long-range investment should not be diminished by the need for extra investments in physical security such as defense. Similarly, federal research commitment must be sustained over time and across all disciplines (Caploe, 2009). Through the use of accelerated commercialization programs or reduced public-private collaboration barriers, university, cooperate and federal state should be leveraged. Within local and state levels, commitment to greater up-front is required so as to develop credentialed and qualified corps of K-12S science and math teachers. In addition, increased global challenge should call for global managers to focus investments on continuous training of the workforce. Where appropriate, such training should be done in industrial conjunction or partnership. Such an action will ensure community colleges or other educational institutions are engaging in production of globally competitive workforce capable of meeting the requirements of a rapid economy change.
In cases of incumbent workers, providing conducive workplace would facilitate security, flexibility or skills development. For example, minority populations in California contribute a growing share of the country's population. Global managers should ensure potential inherent within the state's diversified workforce is highly developed (Rifkin, 2006). Large community segments should not be consigned with low job opportunities, low wage, hobbled in future abilities to compete with fellow counterparts within India, China or Korea. Within California, investments should be made to physical infrastructure in particular airports, roads, ports, or bridges. Such infrastructures are essential in transportation of goods or people. Similarly, investments can be accorded to strategies which promote worker mobility in relation to changing job markets, strategies aimed at promoting business or technology networks, research or entrepreneurial assets plus a business climate which account for global competition through reduction of business costs in investments, production or hiring. For private sectors, there will be need for product innovation, higher premiums, service innovation or product.
Chapter 7: Conclusion
From the above discussion, it's evident that China and India has been threatening the global market operations. Operations of these economies have posed several challenges to the global managers, who have been compelled to develop ways of fighting those challenges to acquire a competitive advantage. However, for the competitive advantage to be reached, it has been revealed the need for proper strategic elements prevalence to facilitate fruitful achievements (Moore, 2008).
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