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Time:March 18-20, 2017
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BCG:Saving Globalization—New Trends and Suggestions to Governments and Enterprises

Abstract


The evolvement of globalization has slowed down since the global financial crisis in 2008. In 2016, Brexit, other black swan events, and the signs of populism and local protectionism were on the rise in many countries. People cannot help but ask: Has globalization come to an end? How should countries and enterprises actively promote and influence the direction and process of globalization? In order to address these looming questions, this paper puts forward ideas and opinions based on research, in conjunction with The Boston Consulting Group (BCG), and in worldwide partnership with local governments and enterprises.


Has globalization come to an end?

According to BCG, globalization faces numerous challenges, which leads to unequal distribution of revenue within countries, imbalance in global trade and economic structures, convergence of global economic cycles and a host of other problems.

However, the fundamental driving force of globalization remains unchanged. For this reason, globalization will continuously evolve.


• First, globalization is confronted with serious challenges, such as slowdown or even decline in global trade indicators, economic trade friction between countries, and the rise of local protectionism and populism, etc.


• Second, it is also needed to reflect on a series of problems associated with the globalization process, such as unequal distribution of income within countries, global trade and economic imbalance, and convergence of global economic cycles, etc.


• However, we should not hastily conclude that the process of globalization is ending. Through the analysis of three major globalization tides in history, we found that there were five factors influencing the development of globalization, namely, 1) the desire for sustained improvement of living standards, 2) different advantages of countries, 3) new technology, 4) economic structure, and 5) a global governance system. Among them, the first two are fundamental impetuses to globalization, but in developing countries, the public are still yearning for a better quality of life. Wide development gaps still exist between developing and developed countries and regions, and inter regional comparative advantage is clear-cut. Booming new technologies, such as digital technology, are promoting the world to connect and interact in unprecedented ways. In the context that these two fundamental impetuses are unchanged and new technologies as driving forces, we believe that globalization is bound to continuously forge ahead.


How will globalization evolve in the future?

According to BCG, three major factors are driving new trends of globalization, that is, the rapid development and popularization of digital technology, the more multi-polarized global economic structure, and the decentralized global governance structure.

Driven by the above mentioned three factors, the future development of globalization will follow these three characteristics as follows:


• Development participant: shifting from dominating multinationals to an all-inclusive participation under the platform mode. Globalization used to be dominated by global, large multinationals, but the development and popularization of digital technology in the future will allow the platform-type business model to break geographical boundaries, while creating more opportunities and challenges. With such technology and business mode, more and more small and medium-sized enterprises are able to directly participate in global trade and customer services.


• Development mode: shifting from the worldwide triangular system to the regional triangular system. The structural transformation of global governance and trade patterns means that the concentrated, single centralization structure will cease to exist. The influence of global governance institutions, such as the WTO, the World Bank, IMF and other institutions, gradually weakens. The existing rules of the game are constantly being challenged. While countries around the world do not abandon the multilateral trade framework or the basis of cooperation, we expect that a more diversified, medium-sized global trade pattern will be more common, and demand, production, and resource cooperation in a region will be more frequent, leading the future global economy to move towards development in regional and local perspectives.


• Development carrier: shifting from resource-intensive and labor-intensive industries to knowledge-intensive and technology-intensive industries. With the economies evolving to new stages and the rapid development of digital technologies, we believe that global capital and human flows driven by resource-intensive and labor-intensive industries will gradually go flat and that knowledge-intensive industries brought by sciences and technologies will gradually surpass industrial growth and give new impetus to promote economic globalization.


How should countries and enterprises take proactive action?

At the global level, we suggest that:

• First, all countries should become more confident that globalization will continue to move forward, reaching consensus that globalization does more good than harm.


• Second, it is necessary to actively resolve the problems and drawbacks in the existing globalization scheme. For example, although the global trade may distort distribution, it brings far more benefits than the loss from drawbacks. Extreme trade protectionism brings loss that outweighs the gain. Countries should instead use taxation and spending to redistribute the trade benefits to the affected groups, while increasing human resource inputs to them.


• Finally, it is necessary to embrace a new pattern of globalization, and understand the globalization with new perspectives and indicators. We should think about how countries and their own enterprises participate in the process under the new pattern of globalization. For example, as the development carrier moves from resource-intensive and labor-intensive industries to knowledge-intensive industries driven by technologies and sciences, governments need to intensify inputs in education and science and research, build a business environment highly attractive to knowledge-intensive enterprises and talents, and promote the technological cooperation and sharing between the state and enterprises.


For China, we suggest:

• At the national level, China should further open up its domestic market and integrate into the global economic system. Secondly, China should actively boost bilateral and regional cooperation in the medium run. In view of development, China should seize opportunities to assume the responsibility of a large country in the long run, and participate in and promote the making of global rules. Moreover, in the process of globalization, China should guide Chinese enterprises to restructure and build core capacities, promote small and medium-sized enterprises and private sector to develop, and encourage enterprises and demographic structures to shift from labor-intensive to technology- and intellectuality-intensive. China should also provide resources and policies to support Chinese enterprises to develop soft power in global competition: besides traditional financial support and fiscal and taxation benefits, the Chinese government should provide overseas market information services, the industry-university-institute development system, self-discipline and management of overseas enterprises and their social responsibilities.


At the enterprise level, Chinese enterprises should keep abreast of the times, consolidate and develop comparative and local advantages of manufacturing, winning time for structural reforms. Meanwhile, they should accelerate investment for the future, and establish comparative advantages in technologies and talents by industrial investment and accelerated human resource upgrading. During the course of “going global”, Chinese enterprises should adopt the policy of “focusing on the local”. They need to jump out of the box of “global centralization,” lean towards localization in terms of their strategic framework, corporate mindset, business mode, risk management and performance evaluation, and develop business forms and competitiveness that adapt to a multi-polar world.


 
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