Reading 4: “What is the relation between economics and globalization?”—JIA YUAN

    The relationship between the economy and globalization is a complex and closely intertwined topic, especially in the context of economic globalization, multinational companies have become the core drivers of the global economy. In the process of globalization, transnational corporations have played an important role in changing the way the global economy operates by controlling and coordinating production and service activities in multiple countries.

     First, a distinctive feature of economic globalization is the expansion of multinational corporations and the formation of their global production networks. Multinational companies expand production and markets globally through direct investment (FDI). FDI is growing much faster than global trade, demonstrating the importance of multinational companies in globalization. These companies optimize production by seeking low-cost resources, technologies, and markets, and leverage the policies and market advantages of different countries to form a global production and supply chain. In natural resource-intensive industries, for example, TNCs expand their global production networks by establishing production bases close to regions with uneven distribution of resources.

     Secondly, the activities of transnational corporations and the process of globalization are not just economic, they are deeply embedded in the political, social and cultural environments of individual countries. Despite their transnational nature, these companies play a key role in corporate decision-making and management. Countries' political systems, cultural backgrounds and economic policies have influenced the way transnational corporations operate and strategies for global expansion. Even in today's highly globalized world, companies remain subject to the economic and political environment of their home countries. Thus, globalization does not completely dissolve the local nature of the enterprise, but rather creates a dynamic balance between the global network and the local embedding.

     Moreover, power relations in the process of globalization are also aspects of the relationship between economy and globalization that cannot be ignored. TNCs are generally considered to have an advantage over the State because of their ability to divert resources and circumvent regulations. Nevertheless, the State retains control over TNCs in its territory. For example, when TNCs expand their operations in certain countries, they must comply with the policies and regulations of those countries and negotiate under specific conditions. For example, in the Chinese market, multinationals must accept strict restrictions and regulations on foreign access by the Chinese government if they want to enter this fast-growing market. This shows that the state still has a significant influence in the game with multinational corporations.

      However, the global expansion of TNCs is not without challenges. As globalization intensifies, differences in markets, resources and labour between countries are further amplified, leading to high levels of inequality in the global economy. TNCs in developed countries usually invest in developing countries and use their cheap labour and resources for production, thus generating higher profits. In the process, transnational corporations not only contribute to the economic growth of these countries, but also contribute to increased economic dependence and inequality. The unbalanced effects of these globalizations have also led to reflections and doubts about globalization.

     To sum up, the relationship between the economy and globalization is mainly reflected in the global production networks and resource flows driven by transnational corporations. Globalization, through transnational corporations, has brought countries ' economies, resources, technology and labour closer together, forming a trend towards global economic integration. However, this trend has also raised complex issues such as economic inequality and power imbalances, prompting deeper reflection on the impact of globalization.