After 15 years of strenuous negotiations, on December 11th 2001, China was included into the World Trade Organization (WTO). Since then, globalization has swept the whole world with an irresistible force, and China has assumed one of most important leading roles.
Indeed, China has caught worldwide attention in quite a few fields in the course of progress and development: its annual GDP grows at double digit over the last 20 years, surpassing the most developed western countries and securing a striking rank second only to the USA; it’s the largest exporter the world over and for long time the hottest destination for FDI; it’s the biggest pollution maker; and it has the most extended high-speed railway network and the busiest ports that have the most intensive containers traffic and the highest number of cities with more than one million people.
This is just a short list of all the situations where China plays a fundamental role, but is sufficient enough to confirm that during the last ten years, China has become the spotlight of the international arena and took a leader’s position on the “new continent” of globalization.
However, the seemingly everlasting development and successes was interrupted by the global financial crisis in 2008, spreading rapidly from the financial and banking sectors to the industrial sectors. Plagued by the debt crisis, consumption and production shrunk, fortune dwindled and unemployment rate soared. It reminds us the Great Depression before the Second World War. Approaching to the new Dragon Year, we are still scrambling for the right plans to tame this raging monster and enter into a new economic expansion cycle.
Analyses show that 2012 could be worse than 2011, but considering the dynamics of globalization and countermeasures adopted by the players on the global market, it’s possible that some new potential drivers could take away the crisis.
In other words, companies who decide to delocalize their activities in some low cost countries should deliberate on two key factors: the first one is that only if the level of demand in the home market is strong enough to sufficient profit to pay back the investment of the proposed delocalization; the second is that only if the company has the financial and organizational strength to manage that investment, the final result could be positive. So, during a hard time like the current one, it’s dangerous to ignore these two prerequisites and start the delocalization programs without certainty about the right level of profit. For this reason, the globalization could be go ahead slowly than in the past years.
But there is another piece of news that could change the course of the current cycle from negative to positive in the foreseeable future. The strong demand in the mature markets (Europe and USA) may stop the classic model of the delocalization that helps China and some other countries to develop their economy: the foreigner companies invested in the low cost country for producing at lower costs and at higher level of profits and then export and sell in the rich markets of the origin countries.
The current dynamic demand for goods (and its day by day lower level) interrupts that circuit, causing some negative impacts on the industrial structure of the developed countries. Some companies disappear and the new teams of unemployed are added to old ones.
On the other side, the rising demand of the goods in the markets at beginning of the globalization gives to those companies one more chance: the former instrumental investment becomes now the final investment, or, in other words, the final decision is to produce products locally to satisfy local demand that could support the investment. In this way, the companies become “glocal” (global and local), but the long supply chain (that crosses different countries and continents) cannot be managed during a period of crisis like this one, when the financial assessments are weak and the demand fluctuates. For this reason, the choice to produce close to the final market can be the right one and also, in some situation, the only one available for being competitive and continue to drive its business ahead.
But if it’s true for the rising market like China, Brazil or India (just few examples) could be true also for the Europe. There must be some new good opportunities for our national industrial sectors along this road. Overall, if the government adopts some industrial policies to improve the industrial environment. Every difficult situation could emerge some new opportunities to rebalance the global system. This could be a wish for 2012, the new coming Dragon Year: be global cannot be again being local because both of them need each other. At least this is already a well known truth.