The Great Debate UK
Britain’s economy should learn to speak a little Chinese
- John Ross is visiting professor at Shanghai’s Jiao Tong University where he writes a blog on globalisation. The views expressed are his own. -
The success of China’s economic stimulus package has attracted increasing attention in Britain and internationally for two reasons. The first is simply its importance for the world economy. Second whether there are general lessons to be learned.
The impact of China’s economic programme can be seen in that it is likely the whole of world economic growth this year in net terms will be accounted for by China.
The sceptics on China’s stimulus package have been disproved by the facts. China’s GDP growth this year will be eight percent or slightly above. China’s GDP grew by 7.9 percent year-on-year in the second quarter and was accelerating –- the best private sector estimates are China’s economy grew at an annualised 13-15 percent in the second quarter. Urban investment increased 34 percent and as producer prices were dropping the real increase was probably around 40 percent. Retail sales increased 15 percent.
This is a stellar performance in conditions where most major world economies will shrink this year. Compared to these results talk of possible “green shoots” in other economies relates to minor improvements.
China’s economy is not large enough that its growth is able by itself to turn round the world economy. But it is sufficient to having a stabilising effect in East Asia with beneficial knock on consequences. Those wanting further detail on the scale of contribution of China’s growth to the world economy should read Professor Danny Quah, of the London School of Economics’, excellent recent paper on Asian growth.
But if the significance of the scale of the international impact of China’s economic performance is evident are there policy lessons which can be drawn by Britain?
Words of caution are appropriate, of course, whenever dealing with economic developments affecting billions of people, shifting billions of pounds sterling – the kinds of things observable from outer space.
But it is ironic to speak of people living beyond their means in China when just months ago the international community were blaming the Chinese (and others in the Far East) for excessive “Asian thrift” flooding world markets with cheap capital.
Finally, on not being fooled by a transient upturn: Every recovery is transient until it beds in and becomes permanent – and we are much more likely to see that permanence emerge following on any kind of a measurable recovery than suddenly spring up full blown to surprise us all.