Effects of Globalization on Shanghai - the Commercial and Financial Center of Mainland China

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Effects of globalization on Shanghai,

the commercial and financial center of mainland China

July 15th 2017

Brief introduction of globalization

Globalization refers to an objective historical process and trend that the transnational flow of production factors, such as capital, goods, services, technology, information, and people, developed rapidly.^[1] Under this condition, the global market economy has been further developed, and the integration and reorganization of the state and other political forces, as well as linkages and interactions among countries have been greatly strengthened. In fact, globalization is essentially a geographical process, which to a great extent reveals the process of the industry diffusion and city development.^[2] Due to technological revolution centered on electronic technology and the improvement of transport in the middle of the twentieth Century, enterprises have achieved further collectivization and automation. During the recent years, globalization entered a new stage, where the world has formed an interdependent and interactive network made up of capital, finance, information and technology.

Cities are parts of the nodes and chains of global or regional economic system networks. The developed metropolitan areas, which have gathered advanced technologies and comprehensive scientific research around the world, are the main basis of the global network. Globalization has a great influence on the industry development, spatial organization, and structure evolution of cities.^[3] This article mainly discusses the effects of globalization from the view of enterprises and cities, with the example of Shanghai, the commercial and financial center of mainland China.

Favorable effects of globalization on Shanghai: Bring In

With significant geographical advantages, Shanghai is located in the intersection of the Yangtse River and central line of the Gold Coast, which is conductive to foreign trades. As the economic center and essential industrial base of China, Shanghai has always been the core development area of Chinese economic policies, since the Pudong District development strategy in 1990s until the recent Shanghai free trade zone policy.

Globalization brings in a large amount of capital, which promotes the construction of Shanghai, especially some key areas of economic development like Pudong New District. As a new area for outward expansion of Shanghai, the functional orientation of Pudong New District is an export-oriented, multi-functional modern urban area. Since the Pudong development related polices were introduced, a great number of functional foreign banks, financial institutions and multinational companies entered Pudong, and became the main part of the functional development of this new district. The accumulation of transnational capital in Pudong promoted the development of this new region. Investments of multinational companies in finance, trade, real estate, commercial retail and other industries, not only promoted the new upgrade of industrial structure, but also directly improved the living environment of district residents and commercial service facilities.^[4]

Additionally, globalization also brings in technology and management experience for enterprises, creating conditions for enterprises to be in line with international standards. For example, the rapidly rising Internet penetration rate, popularization of online payment, and logistics network coverage brought about by globalization inspired the development of electronic commerce during the recent years. Especially since the establishment of the Shanghai Free Trade Zone, e-commerce industry in Shanghai is growing fast stably, which attracted many large e-commerce companies around the world entering the Chinese market by cooperating with local e-commerce companies. In 2014, Amazon announced the cooperation with KJT.COM, an official online trading platform of Shanghai Free Trade Zone, and Shanghai Information Investment Ltd in cross-border e-commerce business.^[5] Such cooperation benefited local online trading platform through learning of advanced technologies as well as efficient operating strategies and methods.

Favorable effects of globalization on Shanghai: Going Out

Economic globalization has opened up a wide range of international markets for Chinese enterprises to go out. As the economic center and essential industrial base of China, Shanghai takes the lead in Chinese Going Out police, which is mainly shown in two aspects, overseas investments and exports through cross-border e-commerce platforms.

According to the statistical data, in 2015, Chinese foreign direct investment amounted to 145 billion 670 million US dollars, accounting for 9.9% of the global share of traffic, which was only next to the United States (299 billion 960 million US dollars). This is the highest record in history, and China ranked second in the world for the first time.^[6] During these years, there has been overseas investments in the United States, Japan, Germany, South Korea and other countries, as well as more than ten acquisitions carried out alone or jointly, which involve printing machinery, machine tools, textiles, construction, batteries, automobiles and other industries. Overseas investments are conducive to forming advantages of manufacturing enterprises in Shanghai, and promoting technology innovation and brand building. In addition, it also helped with the oversupplying situation of products, which improved the economic efficiency of enterprises.^[7]