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Can the UK close massive deficit with China?

Robert Peston | 15:22 UK time, Sunday, 7 November 2010

To say that the Chinese market represents a huge opportunity for British companies has traditionally been like saying that there would be no water shortage if only we could get the salt out of seawater cheaply - it's been true in theory, and hugely tricky to do in practice.

George Osborne and Li Keqiang

 

The crude statistics of our trade in goods and services with China tell you most of what you need to know: in 2009 we sold £8.7bn of tangibles and intangibles to China, and we bought three times as much, £25.8bn, from the Chinese.

It's true that UK exports of goods to China rose 44% in the first eight months of 2010 to £4.5bn, but our current account deficit with China is by far the largest deficit we have with any trading partner.

And although over 10 years our sales of goods and services to China have increased by a seemingly healthy 4.6 times, imports have risen by a far greater multiple, 6.6 times.

No British lectures

That said, with the arrival in China of a significant proportion of the British cabinet (chancellor, business secretary, education secretary, energy secretary and prime minister are all coming), as design or luck would have it this may be the moment for British companies to generate significant job-creating sales in China.

When I interviewed Vince Cable in the British Ambassador's Beijing residence earlier today (not too shabby a crib, as my son might say), he insisted that the bilateral deficit with China doesn't bother him - he prefers to see trade in the round, in a multilateral sense.

And Mr Cable insisted he would not be picking up the widespread concerns in the US that the Chinese currency is undervalued: Mr Cable said he had not flown all this way to lecture the Chinese that they should allow the yuan to appreciate against the dollar.

... while in France

So what is the point of this huge ministerial and business mission to Beijing?

Well I suppose that in a China where state-owned enterprises represent a massive proportion of the economy, it probably helps that British ministers are seen to be batting for non state-owned British companies: although I do wonder whether the current sophisticated crop of Chinese ministers and officials genuinely believe that the likes of BP and Rolls-Royce dance to a Whitehall tune.

It's not altogether surprising that when the Chinese president, Hu Jintao, visited France last week, the French president Nicolas Sarkozy claimed the countries had struck £14bn of commercial deals, rather more than Mr Cameron will flaunt: some would say that there is an incestuous relationship between the French state and commerce which is almost Chinese.

Unsustainable economic model

But it's reasonable to be optimistic that UK exports to China will increase because - as the Chinese government concedes - China's economy needs to be reconstructed pretty fundamentally, if the official target of growing at around 8% per annum is to be continued in a sustainable way.

Putting it in the crudest possible terms, the Chinese population of more than 1.3 billion people has to consume more relative to the size of their economy.

Even the Chinese authorities concede that China's current economic model - of growth generated by huge domestic investment and massive net exports helped by an exchange rate that is forcibly held down below where it ought to be - cannot be sustained forever.

Our debt = their surplus

There is of course no consensus between China and America on the urgency of the necessary reforms.

But there is some consensus that the Great Recession of 2008-9 was at least in part caused by the madness of a global economic system in which the net importing western nations, like the US and UK, have taken on crippling indebtedness as the corollary of China's (and Germany's and Japan's) huge surpluses (the dispute between China and America is whether the propensity to borrow created the surpluses, or vice versa).

On that view, the Great Recession was just the first shock - and global economic stability will be illusory unless and until the net exporting nations and net importing ones find an orderly way to achieve balance (which is what the G20 heads of government will agonise about at their summit in Korea at the end of the week).

The Chinese Good Life

Certainly the Chinese seem in little doubt that the massive increase in domestic investment they engineered to restart the economy after it stalled at the end of 2008 is only a short-term fix: it'll seriously hurt the banks which financed the investment unless a market for the output of all the new productive capacity is created at home and abroad.

There is also a much more basic way of seeing the inevitable reconstruction of the Chinese economy towards consumption.

Here in China there is a growing sense that the good life should be about more than just working all hours to supply the trinkets demanded by indebted Brits and Americans.

The Chinese want some cake too.

At the high end of the income scale, they want Beamers and 'S'-class Mercs. Between just June and September, Mercedes sold 41,000 vehicles in China, one in eight of all its car sales, a rate of growth of 140%.

Colossal spending gap

But for most Chinese, it's about much more basic needs.

That is already being reflected - according to the US investment bank Goldman Sachs - in around a third of Chinese GDP growth coming from spending by the household sector in 2010 and 2011, up from 28% three years ago.

In fact Goldman's China economist, Yu Song, thinks the current strength of consumer spending here might mean it delivers 40% of GDP growth.

But that is still about 25 percentage points below the share of consumer spending in the British and American economies.

So the magnitude of the money potentially available to western exporters is colossal.

As Jim O'Neill of Goldman tells me, even now just the growth in China's imports every year is equivalent to the entire output of the Greek economy, or around £250bn.

That's a lot of whisky, and aero-engines and chocolates that could be made in Britain and sold in China.

Update 0800, 8 November: The US has now conceded that there'll be no agreement at the G20 summit on quantitative targets for current account surpluses and deficits.

Which means that there'll be no hardening up of the deal made last month by G20 finance ministers to avoid - in some nebulous sense - long-term current account surpluses and deficits.

That is not a great shock given that the great exporters of Asia, South America and Europe (a big hello to Germany and China) regarded numerical targets as bonkers.

And they opened a new front of criticism against the US, by asserting that the Fed's $600bn of money creation through quantitative easing is degrading the US dollar.

Against that background, it will be fascinating to see what the Chinese commerce minister Chen Deming tells me about the prospects for the G20 Summit, when I interview him tomorrow.

Comments

Page 1 of 3

  • Comment number 1.

    "he Chinese population of more than 1.3 trillion people has to consume more relative to the size of their economy."

    1.3 TRILLION ? WOW. So there are more people living in China than the entire population of the planet, back to the dinosaurs ? No wonder it looks cramped.

    Steve

  • Comment number 2.

    Rather than send a delegation we should repeat out well rehearsed plan of invading them and stealing their stuff.

  • Comment number 3.

    Cable should be concerned with the deficit with China he has just ducked the issue with that response to you Robert. What is his plan for balancing the UK's trade deficit then? I suspect he doesn't have one.

    I would suggest that with regard to China it should be relatively easy - it's not as if the Chinese supply us with must have essentials such as energy and food (with the notable exception of rare earth metals) - it's mailny plastic tat, toys and books which used to be made here and could be again if the right incentives are given especially under the guise of regional development. And if not as the UK alone then part of an EU drve for greater continental self sufficiency.

    More likely is the Chinese will use their vast foreign currency reserves - including GBP to buy British and European assets (plus US although they will be more careful so not to upset). I expect Sainsbury, and Vodafone plus possibly Barclays to fall into foreign ownership soon to continue to fund our trade deficit.

  • Comment number 4.

    You must be living in cloud-cuckoo land if you think we can sell much to China. Our unions have made sure we are uncompetitive in almost every respect.

  • Comment number 5.

    The english ( anglo saxons ) are the most inventive people in the world but unfortunately,like everything,the normans highjacked their flair and trashed it.

    Once the working class are allowed to manufacture again without the typical banking " boom bust " cycle then everything will pick up.

    The pound, unfortunately,is overvalued.George Osbourne keeps buying more sterling because he needs a high pound.The sooner the pound hits one dollar to one pound the sooner the uk will start to recover.

  • Comment number 6.

    Come on 'writingsonthewall' - where are you? I'm missing that insane, relentless rambling.....

  • Comment number 7.

    Maybe Cameron and Cable could flog them an aircraft carrier...virtually brand new (never used in fact) and only one previous owner!

  • Comment number 8.

    What on earth do you think we manufacture in this country that the Chinese could possibly want to buy, that they don't already make themselves? Possibly a few luxury brand name items and pharmacueticals, but little else.

    Reverse trade is just a drop in the ocean of goods heading our way.

  • Comment number 9.

    I don't know. The question seems premature. There is a lot going on right now, especially with the United States' Fed injecting Q.E.2. It can be expected that the G-20 may impact several countries as well.
    China has become more active in the eurozone - a direct result of her conflict with the US.
    Premier Wen Jiabao, during the meeting George Papandreou, said that China had purchased long-term bonds issued by Greece to cover its sovereign debt. China seems determined to continue purchasing the bonds if Athens needs new loans to balance its deficit.
    China holds the largest gold and currency reserves in the world, and it wants no part of the United States' economic policies. The assets of the National Bank of the People's Republic of China exceed 2.5 TRILLION dollars. It's evident that China would like to diversify its reserves because the United States has such enormous debt and there is that pesky qurestion re the value of the American dollar.
    I think if the UK is to ever close its massive trade deficit with China, now would be a good time for Mr. Cameron to jump into action. After all, China and France recently signed 20 billion dollars in trade deals. China and Germany strengthened bilateral trade to the tune of $10 billion (7.85 billion euros). In fact, let's just say that the EU is now China's largest trading partner. David Cameron - better late than never -will start his first official visit to China Tuesday.
    Interesting times ahead...

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    8. At 7:40pm on 07 Nov 2010, NonLondonView wrote:

    What on earth do you think we manufacture in this country that the Chinese could possibly want to buy, that they don't already make themselves? Possibly a few luxury brand name items and pharmacueticals, but little else.

    Reverse trade is just a drop in the ocean of goods heading our way.
    ==============================================================

    How about scientific innovations for a start, like the genetic breakthroughs in medicine...

    But hey, what do I know? I obviously bow to your superior knowledge...or do you just believe everything you read?

    Let all live like the Chinese?..maybe not!

  • Comment number 12.

    The Chinese are not stupid. They have been assiduously learning how to do things from the West. Once they know all the scientific tricks of the trade then and only then will they allow the Renmimbi to perhaps become the world's reserve currency.
    Then their only competitors will be the Russians and Indians.

    The UK will be just another run down, has been, country in Europe.
    Why should the Chinese worry about the UK.
    What have we got that they want?
    Technological know how? Don't make me laugh! That was the first thing to be sold off to them. We are now trying to sell the same knowledge off to the Indians.
    The UK bankers and spivs have sold off 200 years of accumulated scientific
    knowledge and got plastic tat and soft toys in exchange.

    All will not be rosy for the Chinese though. They will still be a nation of haves and have nots for many many years to come.

  • Comment number 13.

    We may buy cheap tat from the Chinese but they are rapidly upskilling all of their industries.

    http://www.nytimes.com/2010/10/28/technology/28compute.html

    Probably the only area where we are still technologicaly ahead of them is in the pharmaceutical industry and that's eroding fast

    http://www.gsk-china.com/english/html/research-development/collaborations-in-china.html


    Perhaps they'll sell opium to us?

  • Comment number 14.

    6. At 6:45pm on 07 Nov 2010, GunthorpeCam wrote:
    ---------------

    It's nice to have a break (although i'm sure it won't last long - i think WOTW said recently he was going on holiday). Moreover its nice to have a blog about business and not just about banks. i was starting to beleive that Robert was "Banking Editor" and not business edotor (as many other posters have said).

    As an aside i don;t think i've ever seen Robert post on this blog. Over on the football side Phil Mcnulty will write his text and then later on he will often post his own message, often in response to other bloggers.

    Are you out there Robert!?

  • Comment number 15.

    Just stop buying Western products made in China to make a few more % for Western shareholders and stop offshoring manufacturing of Western products.

    Isolate China - you know it makes sense.

  • Comment number 16.

    Morning Robert,
    thank you for the update on our China balance of payments deficit.
    It's been nearly 30 years since I was allowed to visit China to give a training course on the use of computers and things have certainly changed!
    For those posters who think that we import plastic goods only from China, I would say, think again. Nearly all electronic goods that one buys these days have had some or all of the components made in China, and that is one of the reasons why we have such a large deficit. China will offer to make Western businesses almost anything you care to name in volume and for a good price because of their labour rates, their technological infrastructure, and their relativly weak currency. Many of the upcoming Christmas, must-have toys, will have been made in China so what do you do, tell your kids that they can't have them?
    One of the problems in selling technology to China used to be that they would only buy one plant or factory which was provided with sufficient technical manuals to enable copies to be built by themselves. This was because, in the old days, everything was bought from the West with foreign currency which came primarily from tourism. Therefore, American tourists were treated as number one visitors, then Japanese tourists, then any other tourists and finally business men from Japan or the West.
    It always amazes me that Western countries now fall over themselves, desperate to provide exports to China (or India) because in their minds, it is the only game in town.
    All human rights concerns are conveniently forgotten by our rotten politicians when trying to sell our country abroad.
    I note that China is currently launching satellites to provide their own GPS system to remove their dependence on the American system. Is that so that they can sell us cheaper Sat-Nav systems?

  • Comment number 17.

    16. At 01:22am on 08 Nov 2010, splendidhashbrowns wrote:
    Morning Robert,
    thank you for the update on our China balance of payments deficit.
    It's been nearly 30 years since I was allowed to visit China to give a training course on the use of computers and things have certainly changed!
    For those posters who think that we import plastic goods only from China, I would say, think again. Nearly all electronic goods that one buys these days have had some or all of the components made in China, and that is one of the reasons why we have such a large deficit. China will offer to make Western businesses almost anything you care to name in volume and for a good price because of their labour rates, their technological infrastructure, and their relativly weak currency. Many of the upcoming Christmas, must-have toys, will have been made in China so what do you do, tell your kids that they can't have them?
    One of the problems in selling technology to China used to be that they would only buy one plant or factory which was provided with sufficient technical manuals to enable copies to be built by themselves. This was because, in the old days, everything was bought from the West with foreign currency which came primarily from tourism. Therefore, American tourists were treated as number one visitors, then Japanese tourists, then any other tourists and finally business men from Japan or the West.
    It always amazes me that Western countries now fall over themselves, desperate to provide exports to China (or India) because in their minds, it is the only game in town.
    All human rights concerns are conveniently forgotten by our rotten politicians when trying to sell our country abroad.
    I note that China is currently launching satellites to provide their own GPS system to remove their dependence on the American system. Is that so that they can sell us cheaper Sat-Nav systems?

    ........................................................................


    When was the last time the chinese caused a war?

    So why does the West fear the chinese...could it be because of what the west has done to them.

    The Chinese,are unlikely to take revenge unless we put them in a corner.
    Afterall,the chinese know themselves that by the time their people are all brought up to a reasonable standard of living there probably won't be any raw materials left in the world.

    Perhaps the chinese are more interested in the meaning of life rather than the meaning of money.

  • Comment number 18.

    Zadok is right. In the world of expensive energy and natural resources which is approaching, the Chiunese approach of more state control in planning of everything from the economy to population will be the only way to maintain any semblance of civilisation. They are more focussed on national solidarity and well-being than our system is.

    With over-population across the developed world we too will be forced to be more cpllective and less individualistic.

  • Comment number 19.

    For years and years manufacturing companies in this country were told by the city investors to cut costs and their answer is to export jobs abroad to improve the return to the city.

    Now we are told that these same companies should not have done that just to sell more stuff to china that would retain cash into this country. And now all that has gone before in politics and business is wrong.
    Exactly who in this present government has actually done a real job or even worked?
    And then again did they not all vote to support the banks in the last parliament?
    Sounds like a bandwagon being started and everyone jumping on ..... on a trip to China with lots of photo opportunities to be had.
    To support work and businesses in this country re look at the tax system and how about tax relief for R & D?

  • Comment number 20.

    This is how it was supposed to be, we all buy everything from china and close all our factories, unemployment rising , the roads getting potholes and the grass verges overgrowing, soon we will be like a third world country

  • Comment number 21.

    I'm absolutely with Zadok and sage_of_Cromerarrh.

    Very soon the economy and resources of the planet are going to have to be managed with care and deliberation by states cooperating together, not by the savage drive of multinational corporations and the finance sector.

    That is, if we don't want chaos.

    That is too, if the planet is to be run for the greatest benefit of its inhabitants, and not for the profit of a select few.

    The time to decided is right now.

  • Comment number 22.

    Lets not kid ourselves, the chinese dont care about our economy, they are looking after themselves. They also will have learned from our mistakes, which is that mass importing of products from abroad and outsourcing of jobs, throws your economy down the toilet, and creates massive debt. I agree with Sage_of_Cromerarrh that there is a serious problem of expensive energy (peak oil) and other commodities heading our way, and the Chinese approach of a centrally led economy will be a far better position to deal with the challenge. I also believe that the Chinese will only use "capitalism" as and when it suits them, and if it starts to become counter productive, they will drop it very quickly.

  • Comment number 23.

    "That's a lot of whisky, and aero-engines and chocolates that could be made in Britain and sold in China."
    Wow Robert, our manufacturing base must be the envy of China.

  • Comment number 24.

    Mr Peston, can I relate my experience of 'trying' to sell things to the Chinese.I am involved, in a small way, designing products and having the Chinese manufacture them. Our supplier in China, we know quite well, since we have traded since 2003. He is absolutely clear, to the point of dismissing it completely, that the products he makes for us just would not be bought by Chinese consumers. Even though the products are relatively novel, useful, appealing,goodish quality and are popular in the US and UK. There is just not the mindset to buy basic 'western' goods like ours.
    Another new product we had made in China is a pretty universal gadget that could easily be seen in every motor car in the world, one of these 'just in case' items. Very low cost item, relevant, etc.
    when I suggested to the Chinese manufacturer that we should look to sell it to Chinese car owners (bearing in mind that 16m new cars were sold in China the previous year), the answer was'Oh no, the minute it gets onto the market, someone will copy it and sell it (in China) for a fraction of our price' That tells us several things, not least of which is that the manufacturing price we get charged is a lot higher than it should be...and that there is no concept of a spread in the market, ie branded product with a premium price selling alongside unbranded low cost equivalents.
    Having said all this, we did find a car accessory chain willing to let us pitch to them. All the usual things were done to show the product, what it does, etc. The buyer/boss man apparently liked the product to go alongside the other car accessory type products we saw in one of the stores.(No reply yet!) On the face of it, this store could have been on any garage forecourt in the world, but there is definitely this ingrained export-only attitude.
    I protested to our Chinese manufacturer, saying that really China should buy some stuff from its trading partners, otherwise everything is out of balance and could not go on for ever. The attitude was 'could not care less'. They are getting the taste of wealth, now.
    Anyway, just my experience, for what its worth.

  • Comment number 25.

    Just been reading that Tata, the Indian owner of Land Rover Jaguar, is planning to build a Jaguar manufacturing plant in China.

  • Comment number 26.

    The Chinese already make half the things in your house.
    Almost all of your electronics, phones, kids toys, household goods, clothes....in fact most of our high street shops and internet suppliers have become " Chinese retail outlets".
    Even the professional electronics so heavily used by the BBC and others is now being made very capably in China.
    You can't blame the Chinese....they are just doing what they do well, and cheaply too, and our companies and public can't get enough of it, particularily when you think that it costs less to get the stuff from Shanghai to Felixstowe than it costs to get it from Felixstowe to London.
    So what is going to happen when the Chinese start to make complete Aero engines, complete cars and bikes, complete ships, rigs, turbines and industrial plant etc?....all made perfectly, and at half price.
    Currency barriers?... Tarriff barriers?
    The inequality in world pay rates is now catching up with us in the West.....it just needed the means to do it....the shipping container.
    China is beating us all at our own game....Capitalism and free trade.
    The future looks very different...we may once again become "a nation of shopkeepers" (internet ones, of course, selling Chinese goods).
    Or will the problem only be fixed when we all earn less per week than the Chinese do?
    Currency wars may indeed loom large.

  • Comment number 27.

    I think the Indians have got a smarter and more scary model:

    Buy up Western brands and companies. Educate your elite to the highest levels (IITs) and place them into major Western corporations where they can develop alliances with India.

    Chinas's communist legacy makes it less good at branding and they still have a self-reliance concern. I agree that China will need to change it's economic model.

  • Comment number 28.

    China buying our stuff.??
    Yes and they will buy the companies that make the stuff.
    Our pinstripes will be investing in China to get massive returns...Money to the city slickers....Whilst China will be buying our businesses with the aim to maximize their profit...Cheap British labour or close the UK business down and move it to China...Either way the British worker is stuffed.
    If it is high tech stuff, China will buy the stuff, copy it and make it in China.
    High Unemployment on the way regardless.
    This is why there is a high level Government visit to China...They go cap in hand...or perhaps they want a piece of the action...?

  • Comment number 29.

    Can the UK close massive deficit with China?

    Robert you are missing the point. Deficits will be a thing of the future when capitalism is overthrown (which will happen sooner than everybody thinks). You better retrain or be reeducated as anyone other than farmers, metal sheet workers or soldiers (to stop the counter revolutionaries) will no longer be needed.

    Anyone who has ever worked for a bank will be made to clean out the pigs!

  • Comment number 30.

    "I do wonder whether the current sophisticated crop of Chinese ministers and officials genuinely believe that the likes of BP and Rolls-Royce dance to a Whitehall tune."
    ====================

    More the other way round.

    Business spends big money on the tory party as a whole and tories as individuals.

    These are hard headed businessmen - don't tell me all that money is being spent for no return.


  • Comment number 31.

    About the only thing the Chinese want from us is accesses to capital markets so that they can float via IPOs etc. their highly profitable industries and suck more money into China from the West.

    We must face facts the only way to compete with the Chinese is to get our cost base down to Chinese levels - and that does not mean get theirs up to ours. To compete we have to accept we will have to impoverish our whole society from footballers and bankers down to pensioners.

    China will never re-value its currency - we have to devalue ours - the USA is showing us the way, but they are being half hearted about it. The Fed should look at a directed devaluation of large (say over 10M USD ) denominated assets held in the USA or in US Dollars by all foreigners and perhaps US citizens too. Perhaps by a foreigners / high net wealth wealth tax of say 50% on all foreign /large wealth held in the USA currency.

    None of this will happen, and none of this is probably desirable, but without some from of change in the USA itself the problem will only get worse! The extreme inequality in the USA itself is the root cause of the problem and the rabid insane right has been energised to maintain this - see last week. Even though it will be bad for every US citizen!

  • Comment number 32.

    Robert,

    '...if the official target of growing at around 8% per annum is to be continued in a sustainable way.'

    If anything grows exponentially using diminishing resources - it is NOT sustainable.

    Does 'sustainable' in economics always mean temporary?




  • Comment number 33.

    Can't see many chinese buying our products because they are not paid enough money to purchase much at all. There is no chance we could be competitive with them because they are paid too little. It is as simple as that. The whole GATT trade agreement has ruined the west and until they can sort that out nothing will be achievable. I watched a news program a few weeks ago were a well known sweet was manufactured up the road and was selling in a shop for 44p a packet, next door was a pound shop selling 10 packets for a £1 which were made in the east and transported all the way here. How can we compete with that. No chance. Currency wars is the only way.

  • Comment number 34.

    A trade trip to China.
    Ten years too late?
    The whole country waking up too late.
    Like the reckless student
    after his overnight binge party
    on his already maxed out credit card.
    Like that student going to the Cash Machine,
    And Saying, Look, give me some more
    For I have stuff to give you.

    And the Cash Machine replied
    Can you give me life? And the Student Said,
    I can give you bottles of Scotch
    And you can drink them And know what it is like
    To be Me.

    And the Cash Machine thought about it, And asked,
    What does Scotch have to do with life?
    I want you to give me life.
    And the Student Replied,
    I cannot give you life, but I can give you Scotch.

    So the Cash Machine went back to his history books, and he read that in the 1980s, the Japanese were doing the Cash Machine's job and they were given the same spiel. CASH read in the history books that the Japanese had tried Scotch, and it was useful for occupying some of their more troublesome members of society, but otherwise, Scotch was not going to get very far as an excuse for life. So Cash Read further, and

    Cash said,
    "Student, I have nothing to give you unless you start to work for me"
    Student Said,
    "But there are no jobs, and how can you give me a job?"
    Cash said,
    "I will teach you how to count, and how to do my work, from your own home"

    And Student thought about the British-Built Japanese-owned Car whose loan was still waiting to be paid, and wondered what sort of work there would be, for Student knew there were no more jobs making cars. The economists and the engineers had successfully collaborated in making factories so efficient that automation and robotics did most of the work.

    And Student, said, "No, I don't see how I could do your work".
    And Cash Machine said,
    "Firstly, you must learn to count, so that you can count for me.
    Then, I need you to oil my machinery.
    Finally, I want you to read me poetry,
    So that I may be given Life".

    "Poetry! exclaimed the student. But I know nothing of poetry. I only know media studies and computer games."
    So Cash Machine told him to go away until he learned some poetry.

    Meanwhile John Humphrys was still foisted upon the people to inflict upon them their indoctrination that if nothing else they could kick out their government, because that was the joy of Democracy. But the Student asked, what is the use of Democracy, if I know no poetry, and even if I kick out the government, they cannot kick out the bankers, or even the economists and the journalists who refuse to let go of their jobs, but protest so that their pensions are shrunken?

    So a Trade Trip to China was organised, and the politicians and the economists and the journalists collaborated to open the eyes of the people, that Student, and his like might stop drinking lager, and learn to speak poetry.

  • Comment number 35.

    I'm so amazed that British people do not read their own history. What were the reasons for the opium wars with China? Exactly the same - trade imbalances. The UK was buying too much tea and Chinese emperor refused to even grant an audience to the British ambassador as he was seen as a barbarian who could not follow the intricate court protocol.

    Soon there will be another war with China. The West can do NOTHING to counter-balance the trading relationship with China, as the country is becoming more and more self-sufficient.

    The pretext for a war with China is obvious - a campaign for civil rights and free elections. After all the arm industry is one of the biggest in the UK, isn't it?

  • Comment number 36.

    There will come a time when the Chinese workers will rise up and want their share of the huge profits the companies are making at their expense. The Chinese government will not be able to control them forever.What then ???

  • Comment number 37.

    This is like comparing Middle Earth with the Middle Kingdom, no chance. I expect the Chinese will be pretty amenable in some ways, they have, after all, a huge load of Christmas themed junk to offload onto us. Human rights? I wouldn't count on anything, Wendy Deng (aka Mrs. R. Murdoch) won't like it. Do we make anything they want? Maybe, but it will not be very long before they can make it themselves. I wonder if they flew by any Rolls Royce powered airliners?
    Regards, etc.

  • Comment number 38.

    The deficit with China will definitely be reduced; we've given the money for consumer goods to the banks.

  • Comment number 39.

    Plamski,

    You sure that thirteen beaten up landrovers, one frigate with one gun and a Vulcan bomber brought out of retirement are going to sort the People's Liberation Army? I hear the Lib Dems are looking to replace Trident with a shoulder launched nuclear bazooka.

    Now our business 'leaders' have sold off the worthwhile bits of Britain, I can't see an easy way back. China and India have it all - vast (young) populations, intelligent people willing to work hard, natural resources, trade surpluses, etc etc. They've a lot more going for them than the US did before it became a super-power.

    So, yes, I guess the CIA, MI5/6 will be trying to sow division in China.



  • Comment number 40.

    "Can the UK close massive deficit with China"?

    Well, Robert, can any country close it's massive 'deficit' with China?
    The term, deficit btw has many faces, nuances and disaster in the UK today.

    Naturally, the pull and enticement of manufacturing any products for less cost in China, by global companies, has been seductive and successful for more than 15yrs.

    However, this relationship has become less symbiotic in the last five years?

    Of course no-one would suggest that component parts of products made in China are inferior or that counterfeit spares by major brands are produced and sold back with disastrous results on safety. Counterfeit and dangerous spares is a very old story in the public domain, but increasing.

    Many famous global brands outsource build/manufacture, and often don't follow up with quality control - therefore lose their reputation through lack of due care and are paying a very high price indeed through manufacture faults with recall in public view and not so public?

    Furthermore, it is not in the Chinese government's and Chinese business interests to kill the global business geese that lay golden eggs - is it?

  • Comment number 41.

    Trying to take a wide, wide view I offer the following observations:
    1. The Chinese will do things because they are in their interests, not because they are in ours. On the other hand they play a long game (was it Chou En Lai who, when asked ‘was the French Revolution a good thing?’ replied ‘it is too early to tell’), like change to be gradual and fear instability.
    2. While their observance of ‘human rights’ may not be up to our rigorous standards they have a 5000-year old civilisation which has been informed for many centuries by philosophies and religions which many westerners find enlightened, so they are not all bad. In particular, their government is doing its best, in a difficult world, for its people, and the evidence seems to me to be that most of their people appreciate and are content with their government’s efforts. If China is to end up as a – the – major economic and political power, I feel a lot happier about that than I would about certain other states that I might mention!
    3. All they require of us rich westerners at this stage of their development is that we be good consumers – a role which we are only too happy to play. So long as we buy the things they produce so well they will lend us the money to do so.
    4. We fear they will do a ‘Uriah Heep’ on us – we will wake up one day to find we have mortgaged everything to them and we are paupers. If so, of course, we would have only ourselves to blame. But maybe it will not work like that.
    5. The Chinese government sees major dissent and internal ructions as the main threat to this rosy picture of mutual growth and benefit. To that extent our interests are their interests. They would not want to precipitate a collapse of the West e.g. by dumping their $/£/€ holdings all at once. Witness their conduct in the 2007 meltdown.
    6. Nay more, the economic development of the west approx. 1850-1950 showed that the enrichment of the poor does not necessarily entail the pauperisation of the rich – on the contrary, it was a ‘win-win’, at the end of which people at all levels are immeasurably better off.
    7. Perhaps China is standard-bearer in a global version of this sort of development which eventually will embrace even sub-Saharan Africa (where I read that Chinese economic-interest-led development schemes are already reaching places & bringing benefits that western do-goodery never did).
    8. All will be well, and all manner of things shall be well. Except that a huge current account deficit will catch up with us in the end.
    9. Which is why the Germans and French should not be beating us at exporting to China – and they haven’t even devalued their currency!

  • Comment number 42.

    To many defeatist people here, we need Politicians, Unions Boss and Business leaders to get out there and sell the UK brand and Products to the high growth areas like China, rest of Asia and Brazil. We have huge intellectual knowledge and world leaders; just look at our high tech companies, ARM, Immagination technologies, XMOS, Surrey Satellite technologies;

  • Comment number 43.

    4. At 6:23pm on 07 Nov 2010, sandy winder wrote:

    You must be living in cloud-cuckoo land if you think we can sell much to China. Our unions have made sure we are uncompetitive in almost every respect.


    sandy winder: How exactly? Or is this more soundbite musings of the wacky right?

    Bit like The Apprentice last week. Blame is focussed directly on an error or problem which had little or nothing to do with root cause! - Fortunately, Lord Sugar saw through this!

    But you are right in one respect. We do indeed manufacture nothing relative to what we once proudly did. The unions did not lead us to oblivion - even if they were obtuse, or difficult. That was the job of our leaders!

  • Comment number 44.

    I bought shares in Asian Citrus and that was best investment,Shows me 42% increase in 6 months

  • Comment number 45.

    It's about time economics was rejigged as 'environmentalonics' because if the 'economic model' says trade more with China to pull ourselves out of the ghastly mess we're in Heaven help the planet.

    We're back in the Stone Age economically and heading for a Stone Age existence the way things are going. I should have thought you were clever enough to realise this RP and remark on it.

    Why does economics continue to be considered 'in isolation' regardless of the impact on the planet as a whole. This whole nonsense can only end one way and everyone knows it but won't confront it. In no small part thanks to the massive expansion of the Chinese economy and population the days of 'growth' and 'plenty' are so over.

    Dark clouds gathering, be sure.

    G

  • Comment number 46.

    I think the West's behaviour towards China has been extremely naive for many years.
    We have tolerated appalling human rights, sweat shop labour, all to feed monstrous and unsustainable consumerism, paid for with borrowed money.
    We have been incredibly stupid!
    I am all for open trade, but it should have conditions attached, namely that it is open between democracies and that a minimum standard of working conditions has been met, China would fail on both counts.
    Now that we are so in hock to the Chinese, this won't happen of course....

  • Comment number 47.

    Well I can see the BBC are having a 'get to know' China week. How naive is it, and what a waste of ink and breath is it to talk of regulating the output and internal economies of sovereign nations by international agreement at the G20 or any other forum. You are discussing how the human race is evolving - it will be decades before "balance" is achieved by evolution or revolution. And, whose definition of "balance" are you going to use when discussing this "concept" between different cultures.....crackers!

  • Comment number 48.

    China wil only buy what it cannot manufacture itself, once we sell them something they will copy it, make a cheaper inferior product, stop buying our product and flood our markets with copies.

  • Comment number 49.

    Ah... flashbacks from the British Empire vs Qing Empire in the 1800s. The British bought tea and silk from China, and in return the Chinese said, we have nothing to buy from you --> trade imbalances. In the past, the Qing Empire were not armed enough to win the Opium Wars...

    Nowadays though China has enough nukes to drown the British Isles... whilst the UK does not even have enough money to re-new Trident and keep two aircraft carriers... The Chinese have learnt from their past mistakes; whilst the UK is rotten by complacency.

  • Comment number 50.

    My brother is the Director of a Small high end engineering and design company who has recently returned from the last of a series of visits to china he told me that the lack of transparency being unable to tell if parties truely had a record of delivery on deals or not made them reluctant to commit and the high maintainence cost of keeping up relationships i.e. having to station staff out there lead them to conclude it was just not worth doing business there

  • Comment number 51.

    Maybe this trade delegation can learn something from the Chinese.

    Communism has not only worked for them, but its also slowly but surely killing the capitalist West.

  • Comment number 52.

    china will never let their trillions in surplus reduce our trillion in deficit. The yuan is 40% undervalued. It should be the strongest currency in the world yet its the weakest. No one can compete with that.

    The communists don't believe in free markets but are happy that others do so they can make money out it. China wants to be rich because money =power and if you are rich your ideas rule no matter if they are good or bad.

    China is not a western state. they do not think like us at all. Its a mistake to think they do.

    china does abide by any of the 'rules' we do. They ignore copyright, patents, intellectual property, environmental standards and workers rights so of course they can make money. They don't have the costs. Further they have an aggressive commercial espionage strategy.

    So the world economy can never rebalance. given the cost of commodities is the same world wide it shouldn't be cheaper to import paperclips etc.

    The world cannot rebalance through the market mechanism because china doesn't believe in it and are big enough to block it.

    our debt can only get bigger as unemployment remains because nothing we can make will be 'cheaper'. For an identical item a thief selling a car will always outbid a car showroom. China's model is no different to the somali pirates [or the old english privateer model]. Both are doing very well.

  • Comment number 53.

    Robert,

    One consistent theme which crops up time and again is the topic of sovereignty, and specifically, why is it we produce nothing relative to what we did up to the early 80s.

    So yes, the obvious answer, we need to sell more to balance the deficit with China. And to do that, we need to produce something of value.

    But isn't this slightly disingenuous? After all, we have 'enjoyed' 30-odd years of good times - and financial services was the only perceived valuable function we offered the world. And following the dogma of this economical function, we sold profitable businesses, stripped others, pillaged government functions, destroyed families and ways of life, in fact no stone was left unturned, all in keeping with a financial ideologue. Now we have few assets left.

    So, would the answer surely not be we are reaping what we have sowed? Which would mean we conclude that, as a nation, we cannot build cars, scrub floors, make nuclear parts or brew coffee,

    Or is it more a case that it is uneconomical for us to do so?

    I'm curious - how exactly is it uneconomical for us? Compared with what? (apologies for bait!!)

    PS the Chinese will not stop taking and hoarding our money, as alluded. And nor are they particularly interested in the role of global policeman. Why on earth are we as a nation chasing this false eldorado? In fact, the world 'chasing' doesn't quite describe it: more like pursuing with vigour akin to a male guinea-pig meeting its opposite for the first time - are we suffering the equivalent of an addiction to alcohol, viz financial services?

    PPS interesting if you could continue your sojourn to the west coast of America if possible - I wonder if we have missed a trick? America still owns most of its assets, as does most of the EU. What is it exactly we have done wrong to end up in this lambastable outcome?

  • Comment number 54.

    There is a degree of inevitability about China’s rise and influence in the world that we’re just going to have to accept. We have collectively spent too long living a consumer binge on borrowed money and now we have to face the consequences. Also, even though we now know this, there is very little we can do about it – the damage is done. The power has been given away, and outside of a war – and I mean an actual war, not a “trade war” – there is basically no way of getting it back.
    Empires rise and fall. What’s happening to the USA now is simply what they did to the British after WW2/Suez. It’s basically a case of “do what we say or we’ll sell off our foreign currency reserves and bankrupt you”.
    China can now do the same to the USA, and there is nothing Capitol Hill can do.
    China will, quite rightly and understandably, act in its own self-interest, not “do right by America”.
    Also, all this bleating on about ‘human rights’ is a joke too. It’s a western value we’re trying to impose on a sovereign economic superpower. Good luck – not to mention a bit rich considering the role of Britain, France and US in the Opium Wars. We were happy to trash their empire for our own trade gains, and now the boot is on the other foot.
    Sorry ladies and gents, but the game is up. Get used to a future that won’t be as good as your past – and the same applies to your children and grandchildren.

  • Comment number 55.

    @17. At 06:25am on 08 Nov 2010, zadok wrote:
    "When was the last time the chinese caused a war?"
    20 October 1962. When was the last time North Korea caused a war? The Vietnam war started before the Indo Chinese war of '62. The film "Thirteen Days" (blockade of Cuba, AKA "Missile crisis") mentions it only in passing: "What is it about the free world that p*sses the rest of the world off?" (Kenny O'Donnell, adviser to JFK, presumably either paraphrased or over-dramatised).
    If you're an optimist then it's been so long since they invaded a country they're not ever likely to do so, if you're a pessimist then we're about due...

  • Comment number 56.

    31. At 10:12am on 08 Nov 2010, John_from_Hendon wrote:

    "We must face facts the only way to compete with the Chinese is to get our cost base down to Chinese levels - and that does not mean get theirs up to ours."

    How true! With declining productivity and disappearing work ethos particularly amongst the younger generations the only way is regress to producing low value-add items.

    An alternative is, of course, as few people have already mentioned is to move up the chain of value add. Unfortunately, for this you need a restructured education system and not just chucking money at our chaotic state schools.

  • Comment number 57.

    • 45. At 11:36am on 08 Nov 2010, Guy Croft wrote:
    It's about time economics was rejigged as 'environmentalonics' because if the 'economic model' says trade more with China to pull ourselves out of the ghastly mess we're in Heaven help the planet.

    We're back in the Stone Age economically and heading for a Stone Age existence the way things are going. I should have thought you were clever enough to realise this RP and remark on it.

    Why does economics continue to be considered 'in isolation' regardless of the impact on the planet as a whole. This whole nonsense can only end one way and everyone knows it but won't confront it. In no small part thanks to the massive expansion of the Chinese economy and population the days of 'growth' and 'plenty' are so over.

    Dark clouds gathering, be sure.

    G

    .........
    The soon to arrive energy crisis (peak oil) will be the wake up call for those seeking economic growth.

  • Comment number 58.

    OK, perhaps a straightforward war against China is a bit of high call for the UK + USA combined and commodities are out of question, here's what we can export in China:

    WESTERN VALUES!

    Free elections with 100+ different parties, Lady Gaga, Strictly Come Dancing, gangster's cutlure, fine wines (oops, they already got that, good!), LSD, heroin, cocaine, Fractional Reserve Banking, ultra-feminism combined with slutification of the image of the woman, same sex marriages, etc, etc

    One thing they do themselves which will come back to kick them is accelerated urbanisation. Urban populations are perfect in adopting the above values, so it shouldn't be too difficult.

    And on top of that they are already enslaving themselves with mortgages, so that's it, that's your solution! Easy! Use it or be used!

  • Comment number 59.

    Had to respond to the person who asked "when was the last time China started a war?". Well let me see, there's

    1) Korea, and
    2) Vietnam

    And then there's Tibet (not really a war of course in the strictest sense of the word, but try telling that to the Tibetan monks). China also sponsored Pol Pot in Cambodia, Mao famously congratulating him on how little time it took to create the requisite communist society.

    Nice to see the lefties still acting as apologists for every lousy, corrupt regime in the world - as long as its leaders are "anti-capitalist", anything goes eh?

  • Comment number 60.

    Why should the Chinese buy British stuff if they can get better quality German stuff quicker and in the long term cheaper, too. It is most probably going to last longer than any British stuff.

  • Comment number 61.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 62.

    Until the Government stops making manufacturing a dirty word we have no chance of eliminating our trade deficit. Having owned and run a manufacturing business for the last 50 years I have realised that both local and central government consider manufacturing as a milk cow to be milked dry andthen slaughtered.
    With the present elfinsafty and employment laws, the cost of property and the usurious demands of the banks,the only sensible thing to do after developing a product is to get it made in the far east.
    We must have a government that puts more value on engineers and practical skills than on banking and other financial and legal spivs and creates an environment in which production can flourish.
    Until this happens there will be no improvement in our situation and the result will be inflation as costs of imported manufactured goods increase and the value of the pound falls.

  • Comment number 63.

    @61. At 12:53pm on 08 Nov 2010, writingsonthewall wrote:
    "You see folks that's the beauty of the private sector - you can do what you like, there are no consequences - as long as it's off your plate then it no longer exists.
    ...sadly this doesn't work for Governments as there is nobody to pass the problems off to."
    Nonsense. What about PFI? Doesn't even show up as a liability on the balance sheets, everyone's a winner then :-)

  • Comment number 64.

    Mr Peston, I am sure you are struggling to describe the Chinese outlook. well, I can help you. The Chinese outlook is Agricultural. A fine and honourable condition. You see it in their values, how they respect their elderly, how they decide on what is best for their people.
    As an agriculturalist myself, I recognise how and why they do things. They do the obvious things,eg when overpopulation was getting a problem..just deal with it. It is far kinder in the long run.Day to day things, eg if someone robs a bank, the police are free to shoot him on the spot. No incredible expensive drawn out process of enquiry.
    When I compare the West's obsession with so-called human rights, where the result is a weakened society in terms of survival characteristics,I have very few disagreements with how the Chinese do things.
    The Chinese look after their own people,so? Is that not the first duty of any Government? In many ways our Western Governments are handing us up on a plate to the next aggressor or ideological lunacy. Its as if we are inviting our own downfall,do we have a death wish? I think a case could be made to describe it as such.

  • Comment number 65.

    45. At 11:36am on 08 Nov 2010, Guy Croft wrote:

    Why does economics continue to be considered 'in isolation' regardless of the impact on the planet as a whole.


    Guy Croft: The same was (very sadly) said of slavery. It was considered 'uneconomical' by business leaders to abolish... But especially once it was considered abominable...

    (that strikes a particularly uncomfortable chord at least with me, viz environment)

    Incidentally, it took another decade or two after informal recognition before government grew sufficient courage to resist the will of the business community, and outlaw...

  • Comment number 66.

    There is a lot of narrow thinking on here. China is becoming the workshop of the world but this is not of itself a problem. The UK remains the worlds 6th largest manufacturing economy, with an increasing emphasis on producing low volume, high tech, high value products. We can run a trade deficit with China for the bulk of our high volume (and broadly low to mid value) consumer products if we can earn enough by selling our products to the rest of the world. Few truly effective trading systems are wholly bilateral - most involve three or four trading routes operating to mutual benefit.

    Trade as a concept is a balance, and only has long term stability if that balance can be found. In the long term it is China's problem more than ours. If they depend on trading with us for economic growth that can only be sustained if we can also trade with them. Otherwise we will run out of money and their markets will dry up. China have been traders for millenia and I have no doubt they fully understand these facts of life, notwithstsanding any rercent political gloss.

  • Comment number 67.

    Why would the Chinese buy from Britain when they can produce almost everything we used to produce just as well , at the same or better quality , and at half the cost ? Most of the mass marketing done in Britain is with goods from either China or some other far eastern country in a nice package with a British company logo on it.

  • Comment number 68.

    To me the elephant in the room is the minimum wage which is a structural barrier to an improvement in our balance of trade.

  • Comment number 69.

    The assumption here is that China will slow exports when its internal consumption increases as part of a 'rebalancing' act that the West will then benefit from.

    This is not an assumption one can make however as there is no mandatory link between increasing internal consumption and decreasing exports/increasing imports.

    If China starts to consume more of its own products rather than ours, then it can maintain export growth at the same time as increasing internal consumption.

    Germany actually managed to increase both exports and internal consumption since WW2 and the trade gap with the rest of the world increased as Germany dug itself out of post war poverty.

    China is in a similar position and has so many poorer people it can raise their consumption at the same time as employing them to produce more exports.

    In short, hoping Chinese internal consumption will make overpriced, bloated economies in the West become more efficient and productive is not a gamble I would care to place cash on...

  • Comment number 70.

    An unfair trade advantage & unseen environmental disaster.
    Wish someone would count the cost of this!
    We are flooded with electronic goods from China & other countries. Unlike their regulated counterparts when these goods fail it is often impossible to obtain spares to repair them,
    Take the example of a £200+ car DVD with pop out screen sold by the thousands, from retailers like Halfords, the little flexi ribbon connector to the screen often fails on these and they end up in the bin. Another common brand has bulbs that go & cost more than & £50 to replace; the same complete new unit had been sold for £59 so they end in the bin also.
    Thousands of small repair centres have closed their doors in the UK alone.

    If there going to supply they play fair

  • Comment number 71.

    All of the major economies are going to start competitively devaluing their currencies, which is going to cause massive inflation as the real cost of essentials rockets. Currency wars have been going on for years and are only going to get more severe.

    Slightly more of a concern; there are approaching 50 million more men than women in China (official stats, not including unregistered illegal births), with 40 million more men in India than women. That is 90 million restless, volatile young men.

    Not only are currency wars and massive inflation a fact of life, but real wars are just over the horizon too.

    It is going to take technological developments which we cannot even envisage to get us out of this one.

  • Comment number 72.

    We need more realism about the in-built unfairness in Chinese trade practices - it's not just about exchange rates, but about huge tariff barriers as well.

    Together, these factors compel Western companies to move manufacturing to China, rather than exporting to the Chinese market.

    And then, once you've been there for five years, you are compelled to hand over all of your technology to the Chinese.

    They sell us 'trinkets', yes, and lend us the money to buy them, so we end up massively in debt.

    But the side that is often missed is that cheap Chinese imports close down our own trinket factories. So Western economies are being hollowed out by the Chinese.

    It's time we woke up!

  • Comment number 73.

    61. At 12:53pm on 08 Nov 2010, writingsonthewall wrote:
    ...never mind the trade deficit - what about the TRUTH DEFICIT??

    ..........
    Add in the reality of peak oil in 2012, and you'd have covered the lot.
    "How many more lies will the public accept before they awaken from their slumber? - judging by the weekend I've had - they're all doomed I'm afraid."
    Struggling to get through the apathy, of an X factor generation. I know where you are coming from. Is there any evidence of good news about? The Chinese are not going to save us by buying all our products, not that there are many of those left worth shouting about. (note moderators this is a relevant posting to the topic)

  • Comment number 74.

    I was talking to a senior officer from Irelands Garda last week, who was keen to point out that Ireland is about to go down the pan.

    They will soon be having to make use of the EU's stability fund (the one that was supposed to be never used, set up to calm the markets a few months ago).I think the expectation was Greece or Portugal would be the first to hit the buffers.

    The Irish are so worried that their budget will not be agreed, they have delayed by-elections in four constitunencies (one by over 17 months) to protect the fragile majority in goverment.

    So democracy takes a back seat, just to keep the lie going and the banks afloat.

    The Chinese will just take the long term view and wait.The West will drown itself in a sea of debt.

  • Comment number 75.

    #61. At 12:53pm on 08 Nov 2010, writingsonthewall wrote:
    "How many more lies will the public accept before they awaken from their slumber? - judging by the weekend I've had - they're all doomed I'm afraid. Very few of them know what's coming and all of them will not be thinking clearly when it does. This is like watching a slow motion car crash from inside a vacumn (where nobody can hear you scream the warnings)"

    I've always said if there are large numbers of people with a single outlook then they can't all be wrong to be in mass agreement. Then I look around me and the horrible realisation hits me that in fact they can all be wrong when you add ignorance to the mix.

    I walked around my home town centre on Saturday morning and I began to envy their collective stupidity, my home town is a midland working class dump with structural high unemployment yet they elected a Tory MP last time round, says it all really.

  • Comment number 76.

    It's the owners of big 'British' businesses that have brought about what I'm certain is going to be a catastrophe for this country.

    I don't think they were naive in any sense. They knew exactly what they were trying to do. Selling off their employees' jobs, making obscene amounts of cash for themselves and trying to keep it in their own families. Yes they had loyalty, but it was only to their own kith and kin. There was never any real stakeholder status afforded to employees, for all the talk of the 'company family' and shared pain it was all a sham. They were more interested in tax avoiding family trusts than in gaining the trust of their employees.

    It could just be that the conspiracy theorists are right. The New World Order really exists and has engineered Western chaos for it's benefit. It feels as if the rest of us are drugged and staggering over the edge. Ever heard of 'chemtrails'?





  • Comment number 77.

    WHY does Peston think the fact we have a trade deficit with China, or whoever - matter?
    It really is a sign of the Thatcheresque/housewife view of economics.
    IT DOESNT MATTER THAT WE HAVE A TRADE DEFCIT. UK plc isnt some 'Delboy' Trotters Enterprises market trader operation.
    With a population 40x smaller of course we will import more than we export.
    He'll be going on about the size of the national debt yet (funny how he never mentions the cost of the debt)

    1.3 trillion. Hahaha

  • Comment number 78.

    66. At 1:03pm on 08 Nov 2010, oldBoy wrote:

    There is a lot of narrow thinking on here. China is becoming the workshop of the world but this is not of itself a problem. The UK remains the worlds 6th largest manufacturing economy, with an increasing emphasis on producing low volume, high tech, high value products.


    Narrow thinking? I doubt size of economy is the correct measure for net movement of monies from UK to China! Apples for apples please.

  • Comment number 79.

    At 6:23pm on 07 Nov 2010, sandy winder wrote:
    You must be living in cloud-cuckoo land if you think we can sell much to China. Our unions have made sure we are uncompetitive in almost every respect.

    We have some of the weakest Unions in the Western world in our private sector exporting companies. Some people always want someone else to blame.

    Time to leave the 1970s behind. What we do have is managements busily exportng jobs. These are the imports that China has been lapping up. Odd that the Indian and Japanese owners of some of our major manufacturing companies don't do this, and odd that those owners don't seem to have problems with their unions.

  • Comment number 80.

    51. At 12:12pm on 08 Nov 2010, uk_is_toast wrote:

    "Communism has not only worked for them, but its also slowly but surely killing the capitalist West."

    Unfortunately China is merely a 'state capitalist' which is next to dictatorship (centralised control dictated by the few) and not a communist state.

    Capitalism is managing to destroy itself without the aid of China - I mean it was "free and unchecked trade" which brought this trade deficit about - the desire of stateless corporations to create the greatest profit (and try to tackle their diminishing profit margins) through cheaper and cheaper labour - which the Chinese are only too happy to provide (at the barrel of a gun)

    You see the heavily used word "free" is subjective - as there is little long term benefit in "free trade" - unless of course you're in a position to take advantage of that freedom - at the expense of others of course!

    All that "freedom" to fill your empty lives with more and more 'cheap trinkets' to combat your self pity and self loathing - and where has it got you? You still have the same psychological problems and now we're in debt to China to boot.....oh and you're about to become a lot, lot poorer on the world stage.

    (when I say 'you' in that last paragraph I'm not referring to you personally - but I refuse to use the 'one' as it's too associated with royalty)

    ..this is not a new thing - it's been around for hundreds of years...

    "all-out pursuit of wealth and other external commodities encouraged by materialism is dangerous and self-destructive since such a system encourages attachment to the material realm which is ultimately transitory in nature and thus increases the amount of pain and suffering in the world."

  • Comment number 81.

    The City gambled that by destroying our manufacturing base,then threatening the Chinese with " civil disturbance/war " due to the credit crunch,that they would be able to run the banking,insurance and other services for over a billion people in China.


    They lost.

    Now they have to rely on the working class to rise through the mother of invention...being necessity.Just like in the Victorian age when we invented manufacturing.


    Not really a good way to treat the chinese or the anglo saxon people of this great country which has always been favoured by GOD.

  • Comment number 82.

    59. At 12:47pm on 08 Nov 2010, a_sensible_comment wrote:
    Had to respond to the person who asked "when was the last time China started a war?". Well let me see, there's

    1) Korea, and
    2) Vietnam

    And then there's Tibet (not really a war of course in the strictest sense of the word, but try telling that to the Tibetan monks). China also sponsored Pol Pot in Cambodia, Mao famously congratulating him on how little time it took to create the requisite communist society.

    Nice to see the lefties still acting as apologists for every lousy, corrupt regime in the world - as long as its leaders are "anti-capitalist", anything goes eh?



    ..................................................................


    That is the most stupid comment i have every heard...which government department do you work for ?

  • Comment number 83.

    52. At 12:16pm on 08 Nov 2010, jauntycyclist wrote:

    "china will never let their trillions in surplus reduce our trillion in deficit. The yuan is 40% undervalued. It should be the strongest currency in the world yet its the weakest. No one can compete with that. "

    What's the matter? - can't take the fact that the Chinese have 'out-cheated' us at our own cheating game?

    It's not the chinese's fault that we engage in this silly capitalist system - full of cheats and vagabonds - and they have just demonstrated that whilst we (the people) are cheated by the corporations - the corporations (who I presume you speak on behalf of) - will get wiped out when the countries begin cheating.

    ...what a shame our governments are in the pockets of those corporations - or maybe our government would be 'cheating' on our behalf at least.

    I presume you also don't see the US as engaging in currency manipulation (which is what QE is) - you're sounding like just another hypocrite I'm afraid.

  • Comment number 84.

    74. At 1:22pm on 08 Nov 2010, creditunionhero wrote:

    "I was talking to a senior officer from Irelands Garda last week, who was keen to point out that Ireland is about to go down the pan."

    When a government puts it's debt issuance on hold - in the hope that they can resume after they 'impress the markets' with their budget cuts and favour a better rate.....and then the cost of borrowing actually rises for them

    ...you know you're in deep, deep trouble.

    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100008461/ireland-is-running-out-of-time/

    Now where are all those Capitalists? Thin on the ground at the moment - all in hiding - still waiting....sorry I mean hoping...the recovery is just around the next corner...

  • Comment number 85.

    As far as I can see manufacturing output per head in the UK is many times that of China, they tend to make low added-value items, we tend to export high value-added items. We are also still the 6th largets manufacturer in the world.

    Would we really make the stuff here that we buy from China or tend to buy it elsewhere?

    The point that is not addressed is what the added-value difference is (from the numbers it may be about even, given the Chinese are complaining about how the western purchasing departments are reducing their profits).


    If you go to China you can see the effects of Western Culture in the major cities - this in itself creates huge opportunities for us.

    Reality is we need to stop buying as much stuff from abroad (much of which we don't need), have a culture which will buy british if possible, stop borrowing to buy daft stuff and invest in making our exports more competitive through quality and innovation.

    ...and perhaps be a bit more positive?????????

  • Comment number 86.

    The number of Mercedes sold in China is further indication of the separation of the economic classes in China. There are more poor in China than there are people in the U.S. This problem remains a political problem for the Chinese government. The Chinese will learn the lessons of the banking scandle, unlike the Europeans and U.S.
    The Chinese will be developing a larger internal market and this can only be accomplished with higher pay for workers.
    Always view economic numbers from China with the understanding that they are meant to be political and economic, just like European governments.
    When China has established a larger middle class trade with other countries will become more balanced.
    The Chinese government is always aware of the political freedoms that are often associated with expanding economies.

  • Comment number 87.

    At 12:53pm on 08 Nov 2010, writingsonthewall wrote:

    Yes. Lies are still selling quite well. No change there then. As you say, there's mid-2011 crunch time to look forward to. The oversubscribed lie market will take some sort of hit around then (I'm guessing that it'll be a BIG one).

    "Some people need to wake up - they're lying to you because they don't know what else to do!"

    Well.....my suspicion is that many of these liars have an escape capsule waiting somewhere else in the world, paid for by others (you know, pensioners, disabled, unemployed, the lower half of the income spectrum etc).

    BTW I don't post here often and don't intend to. But......good luck. Pity so few of our leaders over the last 40 years seem to have demonstrated the same interest, passion and belief as you.

  • Comment number 88.

    So much negativity in these posts regarding China. We need to increase our manufacturing & IP trade and where better than selling to a country with a massive trade surplus. Dyson, JCB, Rolls-Royce, Smiths, John Crane, BAE, ARM and a myriad of other British companies have products the Chinese will buy and I give one important example. Apple Inc a US company manufactures, ipads & iphones in China both use processors designed by ARM a British company.
    Innovation & high value skills can and should provide growth, both France & Germany produce more goods than we do because they didnt go solely down the banking & service sector route Britain went. We need a sustained period of retaining British companies particularly highly skilled innovators, and propogating new ones hopefully retaining manufacturing in the UK. Our government needs to offer R&D tax breaks & capital investment tax breaks for manufacturing whilst giving nothing to banking or services and maybe after 15- 20 years were repair the damage of the last 20 and will trade with China, India etc on more level terms. (Hopefully both India & China will not have the present trade barriers they both have particularly relating to foriegn ownership)

  • Comment number 89.

    Everyone here is so pessimistic about the ability of the West to compete with China economically. Don't forget about the human rights, freedoms and opportunities (China is still very much a country of personal connections and elitism) in the West that mean hundreds of thousands, if not millions of Chinese and other intelligent, hard-working immigrants seek entry to the west to help your economies compete.

    Sure China wins on the low cost front thanks to millions of poor labourers, but as long as a sizeable portion of the educated talent continues to emigrate, the West will continue to lead in innovation.

    Although given recent immigration debates in the West, maybe this will change too...

  • Comment number 90.

    #16
    quote/..Many of the upcoming Christmas, must-have toys, will have been made in China so what do you do, tell your kids that they can't have them?
    /unquote

    Unfortunately, that's one of the penalties we have to pay for living on credit and as #79 says, exporting the UK's jobs to China.

    It really is that simple.

  • Comment number 91.

    4. At 6:23pm on 07 Nov 2010, sandy winder wrote:
    'You must be living in cloud-cuckoo land if you think we can sell much to China. Our unions have made sure we are uncompetitive in almost every respect.'

    You need to find someone else to blame, this does not cut it any more even as propaganda. Unless you would like to substantiate it of course?


  • Comment number 92.

    • 74. At 1:22pm on 08 Nov 2010, creditunionhero wrote:
    I was talking to a senior officer from Irelands Garda last week, who was keen to point out that Ireland is about to go down the pan.

    They will soon be having to make use of the EU's stability fund (the one that was supposed to be never used, set up to calm the markets a few months ago).I think the expectation was Greece or Portugal would be the first to hit the buffers.

    The Irish are so worried that their budget will not be agreed, they have delayed by-elections in four constitunencies (one by over 17 months) to protect the fragile majority in goverment.

    So democracy takes a back seat, just to keep the lie going and the banks afloat.

    The Chinese will just take the long term view and wait.The West will drown itself in a sea of debt.
    …………….
    Ireland entering the debt spiral, on the heels of the Greeks. I’ve been hearing the same, and our government will help us to follow the same path. You’ve got to hand it to the Chinese. Their government has realised that the path to follow is to improve the prosperity of your population. If people feel prosperous, they don’t bother to make a fuss about democracy, or who is in charge. However, reduce the prosperity of the population and the population starts to get grumpy. Our government have yet to realise this, and so have a large proportion of the population. Austerity or reduced prosperity will generate a big backlash. We have a lot to learn from the Chinese, and I’m not talking about minimal wage costs.

  • Comment number 93.

    Is it not obvious, that if we wish improve our trade balance with China we need to produce more of the goods the Chinese do not produce themselves. High tech innovation must be a large part of the answer.

    Technical education in the UK, is still regarded as second best to business, politics and the humanities. The class system is probably mainly responsible for this attitude. We have a little man who deals with technical problems, so there is no need to understand anything about it ourselves.

    Technical education should start in primary schools. Why is it not considered important that children should have some idea how some of the technical devices which surround them, actually work?

    Incidentally, remember that many working class fathers have technical jobs, or do DIY or have technically based hobbies. So more technical education in schools would probably help overcome the motivational problems that some working class children, especially boys, have with regard to education.

  • Comment number 94.

    For China to consume more inports wages have to rise.
    Therefore cost of our imports go up.
    They 'win'.

  • Comment number 95.

    As a soon to be redundant Careers Ddviser, I remember visiting an engineering firm several years ago, who told me that he was packing up, shipping his factory to China as it was cheaper to make things there and export them to the UK.

    I remember wondering why our economy and particularly our tax and business rates system was not flexible enough to allow our companies to compete on a more level playing field.

    I took the view then that it seemed better to me to have 10 people working for a UK firm and paying tax and NI, than no companies being able to afford to pay commercial rates of taxation. It also seemed to me to be inevitable that many companies would look at moving overseas as long as it remained so expensive to do business here.

    We have to have someone in government who can look at making things as cheap as possible for existing and new manufacturing firms, so that they can take on and train young people.

  • Comment number 96.

    When those Gnomes of Zurich decided that globalisation was in the West's best interests they obviously had a short sighted view.

    What we have got instead is an uncontrolled shift in power from West to East with China dictating the terms and conditions with a few sweeties thrown in just to keep the West quiet in the meantime.

    They must wonder how they have got away with it. No human rights and no employment prtection for their workers but hundreds of companies from the West still wanting them to manufacture their goods on the cheap for them because they can make so much more profit back home.

    Not only that but for all the unemployment in the West there is certainly no sign of any U-turn.

    John of Hendon said we would have to lower our standard of living to compete with China.

    I'm afraid it is too late for that because once China has access to all the world's raw materials it will be looking for more land to house its ballooning population.

    So maybe the one most important and valuable thing we will have left will be an abundance of fresh water. So plenty of scotch whisky then. Although like our natural gas we will have been too short sighted to build the storage facilities needed to make it viable.

  • Comment number 97.

    The following words are hereby banned:

    1. Pessimism
    2. Optimism
    3. Negativity

    Iconic and eclectic are also due to be banned shortly.

    GC

  • Comment number 98.

    To join in the gloom and scepticism. I read Jaguar / Land Rover might be building a factory in China to supply China. The Indian company will then have a cheap manufacturing source and the UK will get no real benefit. Are the British children being born today going to be good strawberry pickers?

  • Comment number 99.

    "However, reduce the prosperity of the population and the population starts to get grumpy. Our government have yet to realise this, and so have a large proportion of the population. Austerity or reduced prosperity will generate a big backlash"

    I vote for a silent revolution, a tax revolution. Just stop paying it everyone. They'll get the message soon enough and they can't send in the army and the police and bang everyone up over that one.

    GC

  • Comment number 100.

    I was disappointed to listen to Vince Cable this morning as he seemed totally unaware and unconcerned about the tourist visa situation with China that is keeping Chinese tourists out of Britain while they tour Europe.

 

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