Theme 3: Interconnectedness and Interdependence of the Contemporary World


Chapter: Economic Globalisation - Your Essential Study Notes

Hello everyone! Welcome to your study notes for Economic Globalisation. This might sound like a huge, complicated topic, but don't worry! We're going to break it down into simple, easy-to-understand parts.

Why is this important? Because economic globalisation affects almost everything in your life – from the smartphone in your hand and the clothes you wear, to your future job prospects and Hong Kong's role in the world. Understanding this will help you make sense of the modern world. Let's get started!


1. What is Economic Globalisation? (The Big Picture)

In simple terms, economic globalisation is the process of the world's economies becoming more connected and dependent on each other. It's like the world is shrinking into one giant marketplace where countries trade goods, services, money, and ideas much more freely and quickly than ever before.

An Everyday Analogy: The Global Food Court

Imagine your school canteen only sold food from your local district. Now, imagine it transforms into a massive international food court. You can buy Japanese sushi, American burgers, Italian pasta, and Thai curry all in one place. The ingredients come from all over the world, the chefs might be from different countries, and you pay using a digital wallet that works anywhere. That's a bit like economic globalisation!

This increased connection is driven by:

  • Technology: The internet, fast communication, and giant container ships make it easy to buy, sell, and ship things globally.
  • Transport: Faster and cheaper air and sea travel moves goods and people around the world efficiently.
  • Policies: Many governments have lowered barriers to trade (like taxes on imported goods) to encourage international business.
Key Takeaway

Economic Globalisation means countries' economies are no longer separate islands; they are part of a massive, interconnected global network. What happens in one country can quickly affect others.


2. The Referees of the Game: International Economic Organisations

With so many countries trading with each other, you need some "rules of the road" or referees to make sure things are fair and stable. That's where international economic organisations come in. The syllabus requires you to know two main ones.

World Trade Organization (WTO)

What it does: The WTO sets the rules for international trade. Its main goal is to ensure that trade flows as smoothly, predictably, and freely as possible.

Think of it as: The referee in a global football match. It makes sure countries play by the rules (trade agreements), settles disputes when one country complains about another (e.g., "They are unfairly blocking our products!"), and encourages everyone to lower their defences (trade barriers) to make the game more open and exciting.

World Bank

What it does: The World Bank's main mission is to fight global poverty. It provides loans and technical assistance to developing countries for projects like building schools, providing clean water, or improving healthcare systems.

Think of it as: A global development fund or a charity that helps poorer countries build up their strength. It invests in projects that will help a country's economy grow and improve the quality of life for its people in the long run.

Quick Review Box

WTO = Trade Rules (The Referee)
World Bank = Poverty Reduction (The Developer/Funder)

A common mistake is mixing these two up! Remember: Trade for WTO.


3. The Giants: Multinational Corporations (MNCs)

A Multinational Corporation (MNC) is a huge company that operates in many different countries. You see them every day!

Examples: Apple (USA), Samsung (South Korea), McDonald's (USA), Toyota (Japan), HSBC (UK).

How do MNCs develop and what is their impact?
  • They go global: MNCs set up factories, offices, and stores all over the world to sell their products to a global market and to produce their goods more cheaply.
  • Impact on countries: They bring jobs, technology, and investment into a country. For example, a new car factory can create thousands of jobs.
  • Impact on culture: They spread products and lifestyles globally. Think about how brands like Nike or Starbucks are recognised almost everywhere.
  • Impact on local business: They can also create tough competition for smaller, local companies that may struggle to compete with the MNCs' huge resources and low prices.
Did You Know?

The revenue of some of the largest MNCs, like Apple or Amazon, is bigger than the entire economy (GDP) of many countries! This shows just how powerful and influential they are in the global economy.


4. The Moving Pieces: Global Labour and Financial Markets

Globalisation doesn't just move products; it moves labour (workers) and money (finance) too.

Global Labour and the International Division of Labour

The international division of labour means that different stages of producing a single product happen in different countries. Companies do this to be more efficient and save money.

Step-by-Step Example: Making a Smartphone

  1. Design & Engineering (High-skill jobs): Happens in a country with top universities and research centres, like the USA.
  2. Manufacturing Key Components (e.g., screen, processor): Happens in countries with advanced technology, like South Korea or Taiwan.
  3. Assembly (Lower-skill jobs): Happens in a country with a large labour force and lower wages, like Mainland China or Vietnam.
  4. Marketing & Sales: Happens in every country where the phone is sold.

This also leads to the mobility of the global labour market, where skilled workers often move to other countries for better job opportunities.

Global Financial Market Integration

This sounds complex, but it just means that money can now move across the world instantly. Thanks to technology, an investor in Hong Kong can buy stocks on the New York Stock Exchange in seconds.

Think of it this way: The world's financial systems are all connected by invisible "digital pipes." Money flows through these pipes 24/7. This makes it easier for businesses to get funding from anywhere in the world, but it also means that a problem in one market (like a bank crash in the US) can quickly spread and cause problems everywhere else.

Key Takeaway

In a globalised economy, a product is rarely "made in one country." Its creation involves a global supply chain of labour and is funded by a global flow of money.


5. From Factories to Phones: The Development of New Economies

Economic globalisation has helped to create a shift from "old" manufacturing-based economies to "new" technology-based economies.

  • Manufacturing-based Economies ("Old Economy"): Focused on making physical things. For example, Hong Kong in the 1970s was a major centre for manufacturing toys, clothes, and electronics.
  • Technology-based Economies ("New Economy"): Focused on knowledge, ideas, and services. This includes software development, e-commerce, big data analysis, and artificial intelligence. For example, Silicon Valley in the US or tech hubs in Shenzhen.

This shift is important because the "new economy" creates high-value jobs and doesn't rely on huge factories or physical resources. It relies on brainpower!


6. How Economic Globalisation Affects YOU, Hong Kong, and Our Country

This is the most important part – connecting all these ideas to our lives.

Impact on Individuals (You!)
  • Consumption (What you buy):
    Pros: You have access to a huge variety of products from all over the world, often at lower prices. Think of shopping on Taobao or Amazon!
    Cons: Competition can sometimes push out local brands. Our tastes and trends can become very similar to the rest of the world.

  • Employment (Your future job):
    Pros: Creates new job opportunities, especially in fields like finance, logistics, and technology. You could work for a global company right here in Hong Kong.
    Cons: Some jobs, especially in manufacturing, may move to countries with lower wages. You will be competing for jobs not just with people in Hong Kong, but with skilled people from around the world.
Impact on the Development of Hong Kong and Our Country
  • Hong Kong:
    Economic globalisation is VITAL for Hong Kong. Hong Kong has thrived as a major international financial centre and a trade and logistics hub. It acts as a "super-connector" linking Mainland China's economy with the rest of the world. CEPA (Closer Economic Partnership Arrangement) is an example of how Hong Kong integrates with the Mainland's development.

  • Our Country (Mainland China):
    Globalisation has been transformative. By opening up its economy, China became known as the "world's factory," which dramatically increased its economic strength and lifted hundreds of millions of people out of poverty. Now, the country is rapidly moving towards the "new economy," becoming a leader in areas like e-commerce (Alibaba), social media (TikTok), and telecommunications (Huawei).

Final Summary - You've Got This!

Let's do a quick recap of the key ideas:

  • Globalisation is about the world's economies getting more connected.
  • WTO and World Bank are the key organisations that help manage this process.
  • MNCs are major players that operate globally, creating products through an international division of labour.
  • Money and people are more mobile than ever before, thanks to integrated financial markets.
  • Economies are shifting from making things (manufacturing) to creating ideas (technology).
  • This whole process brings both opportunities (more choice, new jobs) and challenges (more competition) for you, Hong Kong, and our country.

Well done for getting through this chapter! Keep reviewing these key ideas and try to spot examples of economic globalisation in your daily life. You'll see it everywhere!