Will China rescue the West?

Shanghai city skyline

From a rooftop terrace on Shanghai's historic Bund, overlooking the city's magnificent skyline, it was difficult just a couple of hours ago to believe that global markets are in meltdown.

It was all deluxe brands and boomtime euphoria at a party thrown by Sir Richard Branson.

China is still working hard and partying hard, more skyscrapers are blotting out the sun, and its business leaders regard the crisis in the rich West with both detachment and a sense that the cloud over the US and Europe may provide an opportunity for them.

Guo Guangchang, the chairman of Fosun, China's largest conglomerate, told me in an interview that he will take advantage of the fall in share prices to take big stakes in Western businesses - but only where those businesses have the potential to grow in the one place where he sees growth as assured, China.

Over at the largest lighting manufacturer in China, NVC, its chairman, Wu Changjiang, says if his export markets in America and Europe tumble back into recession, he will simply prioritise selling to China - where he says the demand is becoming stronger.

That's the point. There are signs of modest economic slowdown in China. And the Hong Kong and Shanghai stock markets have caught the same cold as the London Stock Exchange and Wall Street.

But China is a world away from slump - and the mood among the Chinese elite is that their country is better protected from the turmoil in the developed world than it was during the great banking crisis of 2008, when China's economy temporarily ground to a halt.

That may be naive. But it also means that although the financially strong Chinese government and Chinese businesses are in a position to help the ailing richer economies - by lending to countries with excessive debts, like Italy, by investing in companies short of capital, even by backing infrastructure projects that create jobs - they will strike a hard bargain.

Little sympathy

That hard bargain might be Western governments being less resistant to the idea of Chinese businesses buying companies in the US and Europe that are regarded as somehow of strategic national importance to us.

The Chinese might also demand the relaxation of restrictions on the exports of certain technologies to them.

The big point is that I got absolutely no sense here that the Chinese feel we are all in this together.

Intellectually they understand that China's vast trade and financial surpluses are causally linked to the unsustainably large debts of the US, UK and a swathe of the eurozone.

But emotionally they take the view that the US and much of Europe have lived high on the hog for too long - and that we need to clean up our own mess.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 18.

    Think tht china waiting for more time for the businesses in west to depreciate then start buying up smart profitable businesses.West has no choice, either to sell it or loose it. As for China's exports being depended on other countries,China is appreciatin its own currency so increasin da buyin pwer of its own ppl nd move away frm being dependent upon exports nd increasin their domestic demand

  • rate this

    Comment number 17.

    My neighbour today said why don't "they" ask Nick Rockefeller to dip into his family's trillions. My neighbour's words were lost on me...What could he possibly mean? Are the Rockefeller's Chinese?

  • rate this

    Comment number 16.

    Let's hope the Chinese have forgotten the Opium Wars and the Boxer Rebellion or they may decide that we have got what we deserve.
    Oh and there is the little matter of our support and arming of Chiang Kai Shek and his warlords.

  • rate this

    Comment number 15.

    Did Sir Dick pay for your flight and hotel or was it my licence fee? If the latter then I'd like to know what your expensive trip is actually going to add to the reporting of the situation and why you couldn't file the same report from your desk in London. If the former then good luck to you and enjoy Shanghai - but try getting out to the sticks, China isn't only skyscrapers and "hostess" bars.

  • rate this

    Comment number 14.

    This 'hubris' thing really is contagious. Maybe China should just stand back and take stock. This crisis is still unravelling - despite the visions of a 'recovery' some poor souls harbor.

    When your economy relies on exports, what do you need?... Customers.

    Are they itching to spend?... Nope!

    Do you have a property bubble?... Oh!

    Good luck China - watch and learn.

  • rate this

    Comment number 13.

    Will China rescue the West? They have bought a lot of Western debt - they already "rescued" the West in that the crash would have happened in 2001 or 2002 otherwise. But if it had happened then, it wouldn't have been nearly as bad. Now China can rescue the West as a marketplace, but only if we produce stuff that they want (which the Germans are, and the UK isn't)

  • rate this

    Comment number 12.

    #3. Boilerbill
    " millions of Chinese will wonder why they should prop us up."

    Don't forget the hundreds of millions of Chinese, from the interior, that will wonder why they should prop us up. Any of us.

    Robert: Have you tried a trip into the interior yet?

    For every emerging city there are other cities needed to feed them.
    China has a lot on its hands.
    The rest of the world is actually small..

  • rate this

    Comment number 11.

    Why should it?

    Because China is growing because they make cheap things and the west buy it, their economy has boomed from exports of its goods to the west (hense is massive trade surplus), without us, they wouldn't be where they are now, and without us they aren't going anywhere.....

  • rate this

    Comment number 10.

    Lets face it, China are best placed to save the Euro - and the EU by Extension - because they are not incapacitated by electoral concerns unlike in the West. Chinese shouldn't be too smug however, knowing the way that bubbles form and burst without warning, a bubble burst for them could be far more problematic given that keeping the peace is dependent on continued growth and prosperity

  • rate this

    Comment number 9.

    China are making direct trading arrangements in Turkey, Zambia and elsewhere to avoid the use of Western currencies as intermediate payments - so do not expect any help from China unless it is to their benefit. Suggest China will follow US model of buying foreign assets to expand their markets or to remove competition.

  • rate this

    Comment number 8.

    This is your key statement:
    Financially strong Chinese govt & Chinese businesses are in a position to help ailing western economies - by lending to countries with excessive debts, like Italy & Greece, by investing in companies short of capital, even by backing infrastructure projects that create jobs - but this help will come on Chinese terms, & this is as it should be.

  • rate this

    Comment number 7.

    Its pretty obvious that China will pick and choose where and how it will invest in the West.It won't be for reasons of bailing out the west,it'll be for whats in Chinas best interest.Forget any idea of them doing it out of the goodness of their heart,it'll be for sole gain and benefit for the chinese.

  • rate this

    Comment number 6.

    If Cheap Chinese goods are part of the cause why will they help?

  • rate this

    Comment number 5.

    Interestingly the link I clicked on said 'Can China rescue the West?' The article is actually headed 'Will China rescue the West?'

    These are not the same question.

    I think the most likely is the continued purchasing of the world by China with its excess dollars until effectively China owns the world - then they will help!

  • rate this

    Comment number 4.

    China needs to rescue itself, before it can rescue anyone else. The lemming-like belief that China is an "all-mighty" economic and military
    power belies the realities of its history. It faces extreme demographic,
    climatic and polititcal problems in its future, not to mention energy needs.
    Run far away from Chinese investments, unless you are a fool - and easily parted from your money.

  • rate this

    Comment number 3.

    There are other countries which are in a similar position to China. India, Brazil even Russia. They don't need us with our inflated way of life. Just as many Germans are questioning why they should prop up Greece, millions of Chinese will wonder why they should prop us up.

  • rate this

    Comment number 2.

    Actually, I agree with 1. AnswersNeeded.
    Why should China rescue the west?
    What have we done except wage wars, dropped bombs, killed & demonstrated before the rest of the world what democracy & capitalism really mean?
    That being said, China will likely help the EU because they want to invest somewhere & they will not drop one cent on the US or its Bankster/Treasury.

  • rate this

    Comment number 1.

    Can China rescue the West? Possibly, but why should it?


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