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Does China's surplus matter?

Robert Peston | 12:12 UK time, Tuesday, 9 November 2010

The first time I heard birdsong on this or any of my trips to Beijing was today, when I interviewed the Chinese Commerce Minister, Chen Deming.

Chen Deming

 

The interview took place in a magnificent and tranquil government-owned estate, the Diaoyutai state guesthouse - where Britain's Chancellor of the Exchequer, business secretary and energy secretary were holding talks with their Chinese opposite numbers - right in the middle of this crowded noisy city.

In a boardroom the size of a basketball pitch, whose walls are papered in gold and which looks over a willow-fringed lake nourished by bubbling waterfalls, I asked Mr Chen whether he accepted that imbalances - China's substantial surplus and the US deficit in particular - are sources of global economic instability.

As it happens, I asked George Osborne, the Chancellor, the same question last night, when I interviewed him in his perfumed cavernous palace of a Beijing hotel.
No surprise - their answers could not have been more different.

Mr Osborne said he viewed the imbalances as the fundamental cause of the Great Recession of 2008-9. And he added that it was a great priority to reduce the deficits of deficit countries - like the US and UK - and to see a corresponding reduction in the surpluses of countries like China and Germany.

Mr Chen, by contrast, rejected the premise of the question.

Or to put it another way, he refused to accept that China operates an unsustainably large trade surplus.

He pointed out that China actually buys more from many countries in Asia and Africa than its sells to them - which reflects its hunger for commodities and high tech products.

Mr Chen also insisted that as a percentage of GDP China's surplus with the whole world in aggregate is modest - and in so-called "cargo" trade in physical goods is insignificant.

That's as maybe. And certainly there has been a sharp fall in China's current account surplus, from 9.6% of GDP in 2008 according to Goldman Sachs, to a forecast 5.5% this year.

But few would argue that a 5.5% surplus is trivial, because in the boom years before the credit crunch the corollary of large surpluses in China, Germany and Japan was the dangerously rising indebtedness in the US, UK, Ireland and some other mature economies.
So if there is an issue here, according to Mr Chen, it relates to China's trading relationship with one country only.

No prizes for guessing which one: it's the US, whose deficit with China, according to Mr Chen, is greater than China's net deficit with all countries.

Mr Osborne would slightly demur from this view. He thinks that the UK's £17.1bn current account deficit with China is a bit of a problem too.

But the chancellor is probably a bit more optimistic than most US politicians that China's economy is set to be reconstructed over the next few years such that consumption will play a far bigger role in generating growth - which should create valuable new markets for British goods and services, especially for the services in which the UK has a genuine competitive edge (architecture, accounting, insurance, law, education, advertising and so on - and you can whisper the word "banking", if you dare).

On Britain's trading prospects, as it happens, Mr Chen had a few spiky words for UK businesses. British brands are far less familiar to Chinese consumers than Italian and French ones, he said, and need to be promoted much better.

And he was scathing about the alleged inability of British tailors and shirtmakers to export jackets and shirts with short enough sleeves for Chinese men. When he spoke to a British manufacturer about its failure to customise its clothes to suit the typical Chinese man, this manufacturer allegedly said that it expected Chinese economic progress to be accompanied by a lengthening of Chinese arms.

I hope that was an example of official Chinese wit. But Mr Chen's big point, for America - and to a lesser extent for the UK too - is that the American and British governments are largely to blame for their deficits with China.

He says that China wants to buy tons more high tech stuff from both countries, but is prevented by prohibitions on the sale to China of kit that could have a military purpose.

This irks him, because - he says - China wants the hardware and software for peaceful purposes.

He also points out that much of America's deficit is simply the consequence of its own companies outsourcing their production to low-cost China.

Anyway when I raised the question of whether it mightn't be an idea for China's authorities to let the Chinese currency, the Renmimbi, float up a bit more than the 3% or so it has risen against the dollar since the peg was relaxed in June, I received what can only be described as a "stupid boy, Pike" look.

Or to translate for the few of you who've never watched Dad's Army, Mr Chen is adamant that the trade surplus - which he says doesn't exist anyway - would not be eliminated by allowing the Renmimbi to find its natural market level.

All of which rather confirms what Mr Osborne said to me, which is that this week's G20 summit in Korea will make only limited progress on agreeing measures for rectifying the irksome and destabilising imbalances in flows of trade and capital.

So if you happen to think that global economic growth will remain weak and fragile unless and until there is a serious meeting of minds from world leaders on how to eliminate those surpluses and deficits, well you should probably be a bit downcast.

Comments

Page 1 of 2

  • Comment number 1.

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

  • Comment number 2.

    Robert wrote:

    "...if you happen to think that global economic growth will remain weak and fragile unless and until there is a serious meeting of minds from world leaders on how to eliminate those surpluses and deficits"

    I disagree - anyone who thinks that a meting of minds of World leaders can do anything all all about the coming global Depression is living is cloud cuckoo land.

    Why is it the economic commentators refuse to accept that the trillion upon trillion of debt has to be de-leveraged BEFORE a real recovery can start. The future is bust we ensured that by the way that we all acted in the last decade. No leader has any power over the sheer inevitability of the economic arithmetic.

    Commentators should concentrate on persuading people to plan fro the inevitable crushing austerity through the provision of practical advice - such as make sure you can live on no more than 70% of your income even after interest rates have returned to 5%. Continuing to fool people is about as bad an economic crime as having created the problem - see Mervyn King on how he did that!

  • Comment number 3.

    As a Westerner who lived in China for 12 years it is interesting to me how the West rudely continues to try to push its own questionable values down China's throat, especially given that China's political and economic approach does seem to work quite nicely for them and for most of their population. Does our arrogance blind us to the human rights violations and debts in our own backyard?

  • Comment number 4.

    This is a great piece Robert! Not sure I agree with everything the Chinese Commerce Minister, Chen Deming says but he does have some good points.

    The real message for the UK and the US (and parts of the EU) is that the "Washington consensus" is over. We are emerging into a multipolar world. And I think a lot of Western pundits are having difficulty understanding the 'new world order'. Just look at how much hand wringing there is about a lack of consensus at the G20.

    How many of the UK's so-called elites etc. could name the 22 Chinese provinces or the 28 states and 7 territories that make up India. I suspect most of our political and business elites would have a better strike rate with American states or Carribean islands or Swiss ski resorts.


  • Comment number 5.

    Thank You China...for having faith in Rolls Royce Engines.....your order has probably saved their demise.


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

    Now watch some Norman say "It's probably just a ploy "

  • Comment number 6.

    RP wrote:

    "But the chancellor is probably a bit more optimistic than most US politicians that China's economy is set to be reconstructed over the next few years such that consumption will play a far bigger role in generating growth"

    Optimistic....consumption.....growth....


    Oh Robert, you still don't get it, do you?

  • Comment number 7.

    China is now in a very powerful position. After the great recession it has emerged from the ashes as one of the most successful economies in the world.

    It is now prepared to use this financial power to buy friends around the world; the EU; Germany; France; USA and now the U.K. It has money to spend with its friends.

    When you have a customer with a great 'wad of cash' to spend......you don't ask too many questions!

  • Comment number 8.

    > Mr Osborne said he viewed the imbalances as the fundamental cause
    > of the Great Recession of 2008-9.

    George is doing his level best to exonerate his nasty chums in "The City".

    > British brands are far less familiar to Chinese consumers
    > than Italian and French ones, he said

    If one hasn’t heard of a brand then it’s not much of a brand, is it? It’s just a name. And who would spend good money on “branded goods” that nobody off the island has ever heard of, like Dyson, Land Rover, Jaguar or (God forbid) Aquascutum!

  • Comment number 9.

    And how would Britain export accounting, law, insurance, advertising, etc to China? How much of those items do we export to the rest of the world? How do such exports benefit Britain and not just a very few in London? The facts are that physical goods are the only things of real value to trade in this world and the only way of improving living standards for the many and not just few in the capital cities. China has taken the role of manufacturer of the worlds consumer goods and that will be followed by becoming the worlds leading maker of aircraft and other high technology items and then dominate services as well whilst by then our living standards will have dropped to the level where we become a tourist destination for the Chinese masses and become a cheap labour source for Chinese manufactures to outsource assembly to.

  • Comment number 10.

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

  • Comment number 11.

    Robert said..."the UK's £17.1bn current account deficit with China is a bit of a problem too

    Puzzled...is that per annum, or total? If total, it appears miniscule compared to the domestic budgetary problems here in the UK.

    Anybody?

  • Comment number 12.

    I have some sympathy for the Chinese when they get irritated by the simplistic notion that they are the cause of the West's debt problems. I have read some interesting research about the Chinese credit system which favours state-run businesses , leaving private enterprise to fund themselves through savings. In turn, this could be a significant reason behind the large increase in Chinese surpluses. One answer is to help the Chinese re-direct Chinese bank credit towards their private sector.There needs to be a more balanced look at China.

    Chinese inflation is a danger - near 4%? That's our danger as well..

  • Comment number 13.

    Mr. Chen is correct and Mr. Osbourne continues the party line that somehow the Chinese are responsible for the deficits created by the criminal lending of the Western banks facilitated by the UK and US governments. Maybe when those governments attempt to be honest about what happened they will be on better ground when dealing with the Chinese. It is companies of the UK and US that moved the manufacturing to China. This was financed by the banks of the UK and the US. The business communities in both countires spent considerable time and money to "convience" the governments that making China a primary trading partner would create jobs in their countries. China has many more needs than the UK or the US and could use some of the surplus to meet those needs. Since the reasons for the financial collapse have been exposed the UK and US have no moral higher ground to speak to the Chinese.
    You continue to use the term "credit crunch", which has no meaning and certainly is not an accurate description of the current financial climate. The lack of honesty by the governmental representatives about what caused the deficits is the primary problem. How can something be fixed when the cause is denied.

  • Comment number 14.

    I think a picture of Mr.Chen should be placed in every British boardroom.

    This is a man who plays hardball.

    This is a man who says don't dump your problems on others.

    This is a man who says sort yourselves out.

    This is a man who says if it is your mistake you sort it.

    This is a man who says get your act together.

    I warm to Mr.Chen. He says it how it is. The West got itself into this mess so the West should get itself out of it. Quite right.

    I have two questions:

    Where are we going to find a British politician like Mr. Chen?

    Where are we going to find senior managers with Mr. Chen's obvious skill at telling it how it is?

  • Comment number 15.

    Robert, "Does China's surplus matter ?"

    Robert, you have been out of Europe for to long.

    It won't matter a jot once we have gone the same way as as our friends in Eire. You had better get back soon before you miss all the fun?

    You coud do us all favour and leave our delegation out there.

    As for the G20 summit, well they have no answers so lets save a few quid and not bother with it.

  • Comment number 16.

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

  • Comment number 17.

    10. At 1:54pm on 09 Nov 2010
    This comment has been referred for further consideration.
    -----------------------------------------------------

    I may have been a bit harsh with my opinion regarding this article:

    https://www.bbc.co.uk/news/uk-england-11716142

    "We are expanding our factory in China and building a new one in Poland"

  • Comment number 18.

    2. At 12:50pm on 09 Nov 2010, John_from_Hendon wrote:

    Why is it the economic commentators refuse to accept that the trillion upon trillion of debt has to be de-leveraged BEFORE a real recovery can start.


    John_from_Hendon: Brilliant. Magnificent. Truly. Adam Smith could not have out-thought that. Nor could Lady Gaga.

    Before firing off more flagrant right-wing-nonsense, I'd be curious if you could explain your rationale behind this?

    Specifically, how on earth are the good citizens of this country supposed to de-leverage themselves prior to a recovery? Forget government delveraging itself for a moment, that wont happen without a fully functioning tax base.

    10m-odd bankruptcies perhaps?

    That might take down a few banks, but really?

    Curiously, would you lead on that front by example?

  • Comment number 19.

    So China moves towards greater consumerism - who do you think will be manufacturing the stuff the consumers will consume? China has the unbeatable combination of high tech production systems and low wages. The latter will have to rise to produce more disposable income but it has a long way to go before there is any semblance of parity with US/UK levels. With a population of 1.2 billion and the Asia factor the Chinese will not need imports from the west within ten years and trade restrictions/treaties will be essential if the west is not to force down labour costs by 25% to 50% - America joins EU or is it the other way round!

  • Comment number 20.

    14. At 2:05pm on 09 Nov 2010, stanilic wrote:
    Where are we going to find senior managers with Mr. Chen's obvious skill at telling it how it is?
    -----------------------------------------------------
    Obviously not by paying for the brightest and best that we currently have.
    (or the experts in obfuscation and toadying.)

  • Comment number 21.

    Surpluses and Deficits arise when one Party sells more than they buy.... or sells less than they buy. It happens in world trade because there is an unfair disparity in the basic economies and the cost of production.
    For as long as the cost of production in China remains at a fraction of the cost of production in the West, China will have a trade surplus and the West a trade defecit.
    For USA and UK to balance it's books it would have to aggressively prevent or control imports, forcing indiginous businesses to buy within their own economies.
    This isn't likely to happen

  • Comment number 22.

    2. John from Hendon

    John, I see your point but isn't about a third of that debt made up of money "invested"/locked in the housing bubble in the form of mortgages to banks?
    Thats going to take a long, long time to pay off. It seems we are looking at the equivalent of a Japanese type 'lost decade'.
    The comparisons are there - low interest rates, population refusing to consume, businesses unable and unwilling to invest.

    I think we need to concentrate a little more on building a more self sufficient economy in order to ride out global downturns. Hate to say it but it appears that some investment in the future needs to occur and I don't think the private sector will be willing or able. The govt. needs some sort of strategic plan with regards to research and development. Question is - Do they have the expertise to do it?

    In addition to this there are emerging markets which present opportunities but can't be depended upon.

  • Comment number 23.

    This piece from Randall Wray is worth a read today. Not because of the headline but for the analysis and some of the links;

    https://www.businessinsider.com/complete-collapse-not-out-of-the-question-2010-11

    It is not directly related to Robert's piece but seems relevent to the overall theme.

  • Comment number 24.

    It's up to the UK and USA to get their house in order rather than blaming the Chinese.

    The reality is it's UK and USA companies that are importing goods , because it maximises their return rather than Chinese firms "dumping" goods on our shores.

    My own philosophy is buy once , buy good quality ,believe me it's cheaper in the long run.





  • Comment number 25.

    No Doubt within days of the first Rolls Royce engine arriving in Beijing it will be being stripped down to copy the technology, the Chinese have proven time and time again they have as much respect for world patents as they do for human rights.
    Good piece BTW Robert

  • Comment number 26.

    Surely the starting point for re-balancing global trade imbalances, is, err, to start making things that those exporting countries actually want to import?

    And that's down to all of us.

  • Comment number 27.

    Trade Minister Chen Deming's big point, for America - and to a lesser extent for the UK too - is that the American and British governments are largely to blame for their deficits with China”

    Yes we know that but the question is why the heck we keep on following the same policies that got us into this mess?

  • Comment number 28.

    "When he spoke to a British manufacturer about its failure to customise its clothes to suit the typical Chinese man, this manufacturer allegedly said that it expected Chinese economic progress to be accompanied by a lengthening of Chinese arms."

    That bit really stood out for me Robert. I can remember reading about how in the 1950's, the Australian arm of British Motor Corporation reported back to HQ that a big reason why it was losing sales to American and Japanese firms was because the suspension on cars like the Morris Minor had been designed for English suburbia and was totally unsuited to unpaved roads in the Outback. Upon reading this report, BMC's famously dictatorial boss Leonard Lord is reported to have ranted "Well why don't they just improve their bloody roads then?! Or words to that effect!

    Nearly 60 years later it's still the same story!!!

  • Comment number 29.

    24.

    "The reality is it's UK and USA companies that are importing goods , because it maximises their return rather than Chinese firms "dumping" goods on our shores.

    My own philosophy is buy once , buy good quality ,believe me it's cheaper in the long run."

    I agree with your philosophy and I try to practice it.
    However, there are a couple of problems.
    One is, If the British Public started doing that they would realise they are much poorer than they think.
    Secondly, the British public enjoy buying - Its a sign of status to have new stuff and most of all its a leisure activity that they are addicted to. Partly because...
    Next, the British public are cajolled incessently to buy buy buy in an endless delerium of adverts which, ironically, make everything they buy more expensive. (perhaps we can sell the Chinese advertising knowhow - were good at that although I think its a waste of creative ability).
    Finally, the ability of the British public to buy well is deliberately undermined by status consciousness brainwashing, confusing marketing practices, confusion of every kind. We are overwhelmed with consumer information which means that much of what we buy is rubbish. Its incredibly time-consuming and inefficient. Marketing departments have a lot to answer for - we are continually misled to the point where genuinely good products fail.
    Yet again we have, in a round about way, British retailers hoodwinking consumers into spending lots of money on things they either don't need or won't last.


  • Comment number 30.

    Oh come on!!!!

    https://www.bbc.co.uk/news/business-11713398

    Seriously? - they are just taking the living P now - how much more of this 'reverse meritocracy' can we endure?

    You wonder why we're doomed? - well it's because we keep giving the brainless morons who brought us to this point - the task of leading us out!

    The only brightside to this is that with clowns like this speaking for us - it won't be too long before the UK goes the same way as Lloyds (and no, that's not into a 'maybe a profit later' situation, but a 'you have lost your money sucker' instance)

  • Comment number 31.

    2. At 12:50pm on 09 Nov 2010, John_from_Hendon wrote:

    Why is it the economic commentators refuse to accept that the trillion upon trillion of debt has to be de-leveraged BEFORE a real recovery can start. The future is bust we ensured that by the way that we all acted in the last decade. No leader has any power over the sheer inevitability of the economic arithmetic.

    - Typical arch-capitalist. Only cares about himself and when there will be a recovery. Things will never be the same again. It doesn't matter what interest rates will be in the future as capitalism will no longer be practised except underground by the remaining deluded few.

  • Comment number 32.

    25. At 2:49pm on 09 Nov 2010, brownandout wrote:

    "No Doubt within days of the first Rolls Royce engine arriving in Beijing it will be being stripped down to copy the technology, the Chinese have proven time and time again they have as much respect for world patents as they do for human rights."

    ...like the US and their torture? - or can you only see one 'colour' through those spectacles?

    I seem to recall many US companies have been at the centre of industrial espionage in the past....or have those pages been ripped out of your history book - like they never existed..

  • Comment number 33.

    21. At 2:30pm on 09 Nov 2010, aka_bluepeter wrote:

    Surpluses and Deficits arise when one Party sells more than they buy.... or sells less than they buy. It happens in world trade because there is an unfair disparity in the basic economies and the cost of production.

    - You miss the point. Trade shouldn't be for money but for what people need. There is no such thing as surplus or deficit other than the poor not having anything! You're probably just a capitalist sheep like most people on this blog.

  • Comment number 34.

    22. At 2:38pm on 09 Nov 2010, i wrote:

    I think we need to concentrate a little more on building a more self sufficient economy in order to ride out global downturns.

    - Exactly, concentrate on being able to grow food and make things out of wood. Very soon anyone without these sort of skills will find it difficult to survive. How needs bankers? We need farmers!

    In addition to this there are emerging markets which present opportunities but can't be depended upon.

    - Always opportunities for the capitalists. Never let's help some poor people. Typical.

  • Comment number 35.

    "He also points out that much of America's deficit is simply the consequence of its own companies outsourcing their production to low-cost China."

    So then, when is Mr Cameron going to have a chat with the British companies about this? I pointed this out in your blog yesterday. It's not rocket science! The problems we have are our own making, not the Chinese. They've simply taken advantage of the Western greed and Joe Average is paying with his job and debt.

  • Comment number 36.

    24. At 2:41pm on 09 Nov 2010, hughesz wrote:

    My own philosophy is buy once , buy good quality ,believe me it's cheaper in the long run.

    - Learn to make it yourself. What you can't make, trade with a neighbour who can.

  • Comment number 37.

    24 and 29 Good Points

    Perhaps the sheepoles should take less notice of the advertising done by banks and look up a Credit Union or two instead.

    I don't know if they have Credit Unions in China perhaps RP could do some research for us?

  • Comment number 38.

    26. At 2:52pm on 09 Nov 2010, edge540 wrote:

    Surely the starting point for re-balancing global trade imbalances, is, err, to start making things that those exporting countries actually want to import?

    And that's down to all of us.

    - What did the English make the Chinese buy last time? That's right, opium. Now they want to force them to drink whisky.

    https://en.wikipedia.org/wiki/Opium_Wars

  • Comment number 39.

    21. At 2:30pm on 09 Nov 2010, aka_bluepeter wrote:


    "For USA and UK to balance it's books it would have to aggressively prevent or control imports, forcing indiginous businesses to buy within their own economies."

    ...or we could simply issuing debt to fool the people into thinking we're wealthier than we are - and live within our means.

    Of course it's much easier to blame another country for this problem.

  • Comment number 40.

    #30

    I think it might be a good idea for Mr Blank (what an approprite name) to take a quick trip over to Ireland, they look like they need another banker to lead them out of recession????

    Or maybe G.O. could ue him in China????

  • Comment number 41.

    Of course it matters. For the last 500 years China hasn't dominated the world. Normal service is about to be resumed.

  • Comment number 42.

    14. At 2:05pm on 09 Nov 2010, stanilic wrote:

    "I have two questions:

    Where are we going to find a British politician like Mr. Chen?"

    ...when we stop voting for the morons they put in front of us. people who want to get elected are immediately bad for us - they are driven by their own self interest (to get voted in) and not by the interest of others.

    "Where are we going to find senior managers with Mr. Chen's obvious skill at telling it how it is?"

    ...when we stop paying and promoting them for failure.

    I expect my first answer to cause confusion amongst Capitalists - they will have lots of questions about 'how' without ever asking 'why'

  • Comment number 43.

    It takes 2 to tango, deficit + surplus.
    The consumer doesn't have to buy the stuff peddled by the hawker and in fact, the consumer has the greater power in this transaction esp as the stuff being hawked is not especially useful - all the stuff being bought are found in 99p shops. Raising that stuff by 5-10% will still be cheap.
    What happened to the media tune at the height of the crisis that floated the idea that it was the West's addiction to consumerism, especially of useless pap, that has got it to where it is today?
    After the shock...anger...denial.

    It has to be said that it is an addiction that the West is now trying to export to China.

  • Comment number 44.

    34. At 3:15pm on 09 Nov 2010, Workers_Unite wrote:

    - Exactly, concentrate on being able to grow food and make things out of wood. Very soon anyone without these sort of skills will find it difficult to survive. How needs bankers? We need farmers!


    Workers_Unite: I'm confused. Did you mean farmers ought to be equipped with hammers, oh and sickles?

    Please do not confuse political ideologue with economic reality. The last 100 years were full of this. Have we learnt nothing from mistakes of the past?

  • Comment number 45.

    37. At 3:17pm on 09 Nov 2010, creditunionhero wrote:

    I don't know if they have Credit Unions in China perhaps RP could do some research for us?

    - You're not seeing the bigger picture, they'll be no need for credit unions in the future as they'll be no money. You need to start learning skills that are needed. Moving numbers round will be a useless skill.

  • Comment number 46.

    3. At 12:56pm on 09 Nov 2010, Tunrida wrote:

    "Does our arrogance blind us to the human rights violations and debts in our own backyard?"

    Democracy is next to Hypocriscy I'm afraid.

  • Comment number 47.

    The days of globalisation are numbered (at least for future poor countries such as ours). We need to think about manufacturing stuff needed in this country in case we lose the skills. We wont be able to pay China when it has a monopoly on production.

  • Comment number 48.

    29. At 3:06pm on 09 Nov 2010, i

    I concur fully with that post - we have the biggest marketing and advertising industries in the west - why would we need them? good products sell themselves after all.

    A whole industry devoted to convincing us (and our defenceless children) to buy things we don't need. Is this what they mean by 'capitalist efficiency'?

    Why isn't Advertising and Marketing viewed the same as the 'scrounging welfare state' - after all it's sucking wealth out of society and producing nothing we need...

  • Comment number 49.

    I am rather warming to Mr Chen. He is entirely right about one thing: if we want to export to China we have to make the goods and services they want rather than what we would like them to want. I do hope the shirt manufacturer story is a fiction but it has an uncomfortable ring of truth.

    ===========================

    9. At 1:49pm on 09 Nov 2010, Keith wrote:
    And how would Britain export accounting, law, insurance, advertising, etc to China? How much of those items do we export to the rest of the world? How do such exports benefit Britain and not just a very few in London? The facts are that physical goods are the only things of real value to trade in this world and the only way of improving living standards for the many and not just few in the capital cities


    You are sadly very mistaken on much of this. We already export a large amount of law and insurance services to China. Chinese companies regularly instruct UK lawyers and it is a large and rapidly growing market for the large law firms. Physical goods are not the only thing of value and in a digital age the intangible goods, the intellectual property is becoming far far more important. Take a simple example of films. A huge industry in USA. Do you think in 10 years time you will be buying video cassettes or DVDs? Very unlikely, it will all be downloads - no physical good at all. This is already the case for music (a large industry in UK)

  • Comment number 50.

    45. At 3:32pm on 09 Nov 2010, Workers_Unite wrote:

    - You're not seeing the bigger picture, they'll be no need for credit unions in the future as they'll be no money. You need to start learning skills that are needed. Moving numbers round will be a useless skill.


    Workers_Unite: Are you advocating a Star-Trek utopia!?

    Please save the economic models of the loonie-left for the local university rag. Or the communal common garden.

    But first, I am curious: How do you make a living again?

  • Comment number 51.

    14. At 2:05pm on 09 Nov 2010, stanilic wrote:

    Ah yes......telling it like it is. Hmmm......could cause some problems in Western society though. We didn't get where we are today by telling it like it is!?!. Imagine replacing a cheerful lie like "Good morning Sir" or "Pleasure to meet you" to those who have held a position of power and control over your life and squandered their opportunities, with something like "Hello, you short-sighted, incompetent, overpaid, overindulged, arrogant, self-opinionated, selfish, corrupt, irresponsible, talentless person who wouldn't be where you are but for your cronies". I mean, I wouldn't last very long, would I? Best if I just carry on 'telling it like it isn't'.

    But it's true, China's got a surplus alright. A surplus of US Treasuries, $US, Euro, bonds, mining, oil, shipping, agricultural land, commercial property etc etc purchased, as any smart investor would, from under our feet during a "recession". We should probably thank them for propping up what's left of our economies now that the carpetbagging financial geniuses and their political apologists have retired, left town or simply 'disappeared' from the headlines.

    Hmmm....what's next. Oh yes. How about that 100bn quid Trident submarine sneaking about somewhere under the ocean waves.......

    If I sound angry it's probably because I am. Why? Well....like

    2. At 12:50pm on 09 Nov 2010, John_from_Hendon wrote:

    I don't need to be on the 'flying bridge' to see that what's ahead looks like Niagara Falls in flood. And Banker Ben has just locked the throttle on Full Steam Ahead.

  • Comment number 52.

    #24, #29 and #48

    Rampant consumerism...

    Where you buy tat you don't need, with money you don't have, to impress people you don't like.

    The hypocrisy and contradictions are not lost on the Chinese though.

    Whilst we in the west recognise that rampant consumerism was partial to our downfall - we are trying to convince China this is the key to their future prosperity!

    Even if they fell for it, the planet doesn't have the resources for an extra 1.3 billion people driving 4x4s from one air conditioned building to the next. No, I'm afraid it will have to be a wealth transfer.

    The West will be living in caves eating rice and maize.


  • Comment number 53.

    • 2. At 12:50pm on 09 Nov 2010, John_from_Hendon wrote:
    Robert wrote:

    "...if you happen to think that global economic growth will remain weak and fragile unless and until there is a serious meeting of minds from world leaders on how to eliminate those surpluses and deficits"

    I disagree - anyone who thinks that a meting of minds of World leaders can do anything all all about the coming global Depression is living is cloud cuckoo land.

    Why is it the economic commentators refuse to accept that the trillion upon trillion of debt has to be de-leveraged BEFORE a real recovery can start. The future is bust we ensured that by the way that we all acted in the last decade. No leader has any power over the sheer inevitability of the economic arithmetic.

    Commentators should concentrate on persuading people to plan fro the inevitable crushing austerity through the provision of practical advice - such as make sure you can live on no more than 70% of your income even after interest rates have returned to 5%. Continuing to fool people is about as bad an economic crime as having created the problem - see Mervyn King on how he did that!
    …….
    I don’t see the public accepting the crushing austerity I’m afraid. You see nothing annoys people more than reducing their prosperity, and they will not accept they were to blame. The reduction in the standard of living has being going on for years, and disguised by the cheap credit banks were only too willing to lend; people will become angry. The outsourcing of jobs to china, has allowed china to become rich in real wealth as it uses our worthless currencies to buy up the world’s resources, and build there country into becoming self sufficient. They wont want or need our stuff. Only the rich owners of businesses have benefited from this outsourcing and the public are about to figure this all out very soon.

  • Comment number 54.

    44. At 3:31pm on 09 Nov 2010, rowerdave1 wrote:

    Please do not confuse political ideologue with economic reality. The last 100 years were full of this. Have we learnt nothing from mistakes of the past?

    - Exactly, you capitalists will keep on making the same mistakes. Only Marxism can save us (consider we didn't have capitalism when we were cavemen did we?)

  • Comment number 55.

    China isn't a democracy so is able to play the long game with self sufficiency at its heart when the rest of the world is going down the pan due to its greed and arrogance.

    Democracy as we know it has been a disaster and aa we look around us we can see its failings staring us in the face.

    Millions of people all with their own agenda and all wanting to have a system that suits them. Power mad people all promising them the moon but fouling up the system even more by trying to reach it.

    We all want our human rights and loads of protection where no-one falls below the poverty threshold. We all think that our goods should be made by our own workers but when push comes to shove we aren't prepared to pay the higher cost.

    As WOTW said in a previous post democracy is hypocracy but that is what we have been sold so it is little wonder that some people are still unable to grasp that it has just about reached the end as we know it.

    There are moves that should be made to update and improve the system but with a huge majority of voters who would oppose them if they didn't tick their box then we can only look in envy at the growth of China and ask ourselves where we have gone wrong.

  • Comment number 56.

    If we want to essentially live off the back of tortured lives even more than we do now then sing the praises of China. If it wasn't for people putting in the effort we probably wouldn't remember we were involved in the the slave trade before - and again on the same premise: its allright if its cheap. Plus ca change.

  • Comment number 57.

    46. At 3:34pm on 09 Nov 2010, writingsonthewall wrote:

    Democracy is next to Hypocriscy I'm afraid.

    - It's nothing to do with democracy, it's all to do with capitalistic greed. Corporations will sell to anyone.

  • Comment number 58.

    47. At 3:37pm on 09 Nov 2010, cark wrote:

    The days of globalisation are numbered (at least for future poor countries such as ours). We need to think about manufacturing stuff needed in this country in case we lose the skills. We wont be able to pay China when it has a monopoly on production.

    - Stop thinking about manufacturing of goods, it's all tat. Learn how to milk a cow and make butter!

  • Comment number 59.

    50. At 3:44pm on 09 Nov 2010, rowerdave1 wrote:

    But first, I am curious: How do you make a living again?

    - That's all you think about, isn't it? How much do you earn, where do you go on holiday, what clothes does your wife wear? I need none of that and so I don't need a job. I grow my own food, have solar panels for electricity and a wood burner for heat. My entertainment is conversation with like minded individuals. You on the other hand spend your evening watching television, letting the remaining education leak out of your head! You need re-education!

  • Comment number 60.

    'When he spoke to a British manufacturer about its failure to customise its clothes to suit the typical Chinese man, this manufacturer allegedly said that it expected Chinese economic progress to be accompanied by a lengthening of Chinese arms'

    As amusing as that sounds, there is indeed a direct length between wealth and height. As a country's inhabitants become wealthier and their standard of living (mainly diet) improves, their height improves. It is believed this is why the current generation of Japanese youths are much closer in height to Westerners than their parents were.

    Of course, it seems like the manufacturer is taking a bit of a long term view there, but it's always worth having a strategy, no?

    Dave

  • Comment number 61.

    Robert,

    Excellent article!

    In response to the question - does China's surplus matter? My view - yes it really does.

    But first, I would like to offer another perspective:

    Consider China not as a country, but as a big corporation. China plc has a killer-app/product, and consequently is generating excellent growth. Similar to some other corporations, China plc has some question-marks concerning Intellectual Property, and business espionage, among other nefarious allegations.

    Naturally, many other businesses, like UK plc, are interested in tapping into the revenue flow of China plc.

    So, how would UK plc go about this?

    In terms of business case, the numbers look good - put very simply, low production cost increases the bottom line.

    However, there are two very significant and unmitigatable risks concerning future revenue and profitability - and this is where a judgement is needed.

    The judgement: what happens should these risks quantify? Or in other words, what happens if China plc copies our product? And how long is this likely to take?

    Put another way, this means any revenue to be generated from China plc is conditional on a) limited timescale and b) more critically, product/IP loss.

    Not an everyday condition, I'm sure you'll agree. Most business owners would cringe at this prospect.

    So - with that said - what particularly flabbergasts me is the volume of UK businesses closing competent, profitable operations here, and relocating to China.

    In effect, these businesses are telling the world a) we would like to disproportionally increase our revenue for the next 5 or so years and b) after this, a Chinese equivalent will probably become our competition, and in all likelihood, render our proposition unprofitable.

    So - coming back to the point - the surplus China has really matters. But the reason it really matters is what they are able to do with this.

    Specifically, this surplus can and will be used in an entrepreneurial fashion to create Chinese equivalent businesses from our own - which is exactly what is happening.

    For me, this is acutely concerning, as this foray may yet turn out to be a false-eldorado. I hope not, but basic analysis concludes otherwise.

    I await your next article!

  • Comment number 62.

    Not sure why anyone would think much is going to change at G20 meeting, not even Washington is expecting much, as pointed out here https://www.mindfulmoney.co.uk/2184/investing-strategy-/warning-beware-emerging-market-inflation.html. Agree we need global cooperation, as we were promised at height of crisis, but its all case of just ‘every man for himself now’, it seems.

  • Comment number 63.

    58. At 4:13pm on 09 Nov 2010, Workers_Unite

    You cannot be for real. Are you the next alter-ego of Lindsay_from_Hendon?

  • Comment number 64.

    44. At 3:31pm on 09 Nov 2010, rowerdave1 wrote:

    "Please do not confuse political ideologue with economic reality. The last 100 years were full of this. Have we learnt nothing from mistakes of the past?"

    ...but when the economic reality is that the wealthy are living at the expense of the productive - the political ideology reveals itself (unless of course you just want to moan...but then get more of the same)

    I would say that it's because of the mistakes of the past we can contemplate our next move - and ensure we don't make those mistakes again.

    This is not possible with Capitalism as the 'mistakes' are in fact deliberate.

  • Comment number 65.

    52. At 4:06pm on 09 Nov 2010, newblogger wrote:

    "The West will be living in caves eating rice and maize."


    ...maybe that's when it will climb down off it's self-inflated pedestal created by 'glories of the past' - which were in fact attrocities, dressed up to be glories by those who dictate the writing of history.

  • Comment number 66.

    53. At 4:09pm on 09 Nov 2010, Averagejoe

    One thing I have learnt about the great British voter is that...
    "Austerity is fine, as long as it's happening to someone else"

    When the ball drops and the people work out that it is they who are in the firing line - they will be livid - and quite possibly 'uncontrolable'

    This possibly makes us more dangerous than the French or the Greeks as they vent their anger on a regular basis - but this nation stores it all up in a giant powder keg.

  • Comment number 67.

    #18. rowerdave1 wrote:

    "Specifically, how on earth are the good citizens of this country supposed to de-leverage themselves prior to a recovery?"

    This will be impossible for many and those people will, if their debt is crippling them will need to take charge of their own position and move to somewhere less expensive if they can't afford their present home under my 70% rule of thumb.

    Most people are not on the edge and can take steps and they should take those steps - my point is that economics commentators should make people think about their own situations.

    Do you want people to carry on in their profligate ways and lose everything - is that your 'solution'?

    #22. i wrote:

    "about a third of that debt made up of money "invested"/locked in the housing bubble in the form of mortgages to banks? That's going to take a long, long time to pay off. It seems we are looking at the equivalent of a Japanese type 'lost decade'."

    Yes, using the example of history - The Long Depression - also property related - 1873 - 1896 some 23 years I can't see than this £10 trillion hole being 'fixed' in much less.

    I have long written about the need to use QE to get infrastructure constructed and people back to work - but most definitely not keeping bankers in the style they have become accustomed.

    We need to get the country's assets back to productive work at a far lower and more realistic price - hence the loans have to be de-leveraged and there has to be debt deflation and things cannot start to recover until that has taken place.

    #31. Workers_Unite wrote:

    "- Typical arch-capitalist. Only cares about himself and when there will be a recovery"

    Your tag appears to signify the opposition to the facts of life. If you borrow from the capitalist hyenas then you will have to pay them back or be prepared to see them hanging from lampposts - is that your solution - a revolutionary collapse of order? There is nothing united about a revolution - throughout history it is the poor, disposed and marginalised that suffer the most - is that what you stand for? The oppression of the masses by the proletariat - or as in Joseph Stalin
    writings in 1924(?) the The Foundations of Leninism chapter IV The Dictatorship of the Proletariat - I would prefer to avoid that. We may be living through the start of a period of revolutionary change as envisaged by Marx for an industrial society such as the UK - but it has be catalysed by a collapse in capitalism created by the capitalist system itself as he envisiaged.

    Let me ask you, is it the duty of the revolutionary cadre to create the conditions for revolution by making things worse or should your duty be to you fellow man and be directed to alleviating their suffering in a more Methodist or Keir Hardie like way?

  • Comment number 68.

    WOTW

    Tell me after the revolution. Will you still be washing your own underpants and toilet or will you have someone to do this menial task for you?

    Just wanted to check because i feel exploiting others to do this might be oppressive. Or will everyone clean their own underpants. Yes, that is the answer.

    Or will serving and servicing our great leader (hmm hmm) be an honour beyond joy so great that to turn it down would indicate pure madness and a need to be locked up for ones own protection.

    You are a funny guy for a nihilist with no sense of humour.

    keep it up.
    cheers.





  • Comment number 69.

    55. At 4:11pm on 09 Nov 2010, virtualsilverlady wrote:

    "Millions of people all with their own agenda and all wanting to have a system that suits them. Power mad people all promising them the moon but fouling up the system even more by trying to reach it."

    ..that just about sums it up - but interestingly this was exactly what Milton Freidman said would lead to a 'free society'

    "The reason for this is that self-interest drives actors to beneficial behavior"

    This is the basis on which all lies are told - you can vote for whichever party offers you the best deal (regardless of realism or not) - you can spend your money on what you like (regardless of the consequences to you or your peers) and it is acceptable to accept profit from trade without questioning where that additional value was produced.

  • Comment number 70.

    57. At 4:12pm on 09 Nov 2010, Workers_Unite wrote:

    "Democracy is next to Hypocriscy I'm afraid.

    - It's nothing to do with democracy, it's all to do with capitalistic greed. Corporations will sell to anyone."

    ...but democracy allows you to 'vote for freedom' - whilst imprisoning someone else. It promises man will be free - whilst enslaving them through debt. I don't object to people having the vote - it's how that vote is counted and manipulated which I don't like.

    I didn't vote to invade Iraq - and nor did the majority of people - so why were we there? This is no democracy - it's merely a 'free choice of 2'.

    2 headed 1 party system - just as it is in the US.

  • Comment number 71.

    Workers_Unite, I am not suggesting we force anyone to do anything - we, you and me, need to come up with some product that other countries want to buy - note the emphasis on want, or if you like need.

  • Comment number 72.

    63. At 4:40pm on 09 Nov 2010, Kit Green wrote:

    "58. At 4:13pm on 09 Nov 2010, Workers_Unite

    You cannot be for real. Are you the next alter-ego of Lindsay_from_Hendon?"

    I have to admit I have my doubts - if it's true then I shall sell up and join him / her in self sufficient paradise!

  • Comment number 73.

    "Free and fair and without collusion or coersion"

    Right - my backside it is.

    https://www.bbc.co.uk/news/business-11719507

    So for all that free market talk - can anyone actually demonstrate one in action - or are they all cartels designed to rob the poor?

  • Comment number 74.

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

  • Comment number 75.

    67. At 4:47pm on 09 Nov 2010, John_from_Hendon wrote:

    "Let me ask you, is it the duty of the revolutionary cadre to create the conditions for revolution by making things worse or should your duty be to you fellow man and be directed to alleviating their suffering in a more Methodist or Keir Hardie like way?"

    John - I respect your views (unlike those Hendon imposters) - however reformism is not possible for one simple reason.

    Go and ask a rich man (not me) to hand over his wealth so we can bring forward the egalitarian regime we deserve.

    ...he will answer you by pointing his gun in your face - which is why revolution will be the result of this crisis. I wish it was avoidable - but I fear history has proven that the ruling class will fight tooth and nail to retain their privilige.

    ....I mean you have to look at it from their point of view - post capitalism what are they going to be able to provide for society? Nobody wants to employ someone who can only "make money on the stock market"

  • Comment number 76.

    The only, only future for the UK is to export a lot more and the only edge we'd have would be the superb excellence of our products as we can't hope to compete on price. The latter point of course absolutely lost on most people.

    Mind you it should not be that hard to compete with China as most of their stuff falls to bits the second time you use it.

    That said there it would have to be a national strategy and a heck of lot of Govt investment behind that which is never going to happen is it as the new lot in power clearly think investment means the few firms left (like my own) who make things go and get bank loans.

    The government could ban imports from China of course (haha) but they can't because the EU won't let them and all the importers of that second-rate junk (stand at Felixstowe - heck - stand in Sainsbury, Tesco, Office World and all the other retail outlets headed up by 'retail magnates' like the Dragons Den mob and watch it er 'landing') would go bust. Be a bit like stopping grants to farmers. No money - no vote. Nah, import is the new 'get rich quick scheme' and frankly they all belong gaol.

    GC

  • Comment number 77.

    68. At 4:52pm on 09 Nov 2010, johnboy911 wrote:

    "WOTW

    Tell me after the revolution. Will you still be washing your own underpants and toilet or will you have someone to do this menial task for you?"

    I already wash my own underpants and clean my own toilet - why do you have someone to do it for you? Not a good idea because when that person no longer wants to do it - you'll be living in.....well you can guess.

    "Just wanted to check because i feel exploiting others to do this might be oppressive. Or will everyone clean their own underpants. Yes, that is the answer."

    I bet you're one of these people who 'drops it in the washing basket' and as if by magic - it's clean later in the week!

    "Or will serving and servicing our great leader (hmm hmm) be an honour beyond joy so great that to turn it down would indicate pure madness and a need to be locked up for ones own protection."

    Leader? - only those withou direction need a leader. I have direction - I think this is problem you have personally.

    "You are a funny guy for a nihilist with no sense of humour."

    Labels, labels, labels - once again you mistake my economic realism for 'total negativity' - is that how you 'justify' the truth I tell (i.e. he's just negative about everything)
    My life is packed with positive thinking - just today I managed to resolve a problem which could only be done by retaining a positive mind and not getting bogged down in the negativity the business emitted.

    "keep it up."

    ...just ask yourself, is he negaitve - or just realistic?

    Everything is on the up for me - it's all good at my end - it's just that the Economy is going to collapse which might cause a few problems for a while!

  • Comment number 78.

    Competition.
    Competition.
    Competition.

    And not just making things cheaper either. Rather being smart enough to make desirable products in the first place and then not giving them away for others to copy. Either by getting them made offshore, selling them non protected-copyable. Or simply by teaching others how to make them.

    Decent manufacturers in the UK should realize the above tenets. But the money men and their allies, government, don't.
    They just want everything sold off. Cheap.
    Their excuse is that we are now running a knowledge economy and we should all be glad of good universities giving knowledge. Cough splutter.
    Everything is going.
    Everything except what is being ripped off by the bankers.
    The question we should be asking ourselves is whether if we unloaded the bankers could we compete with the rest of the world?

    Watch out for massive massive energy and food cost increases. Why? Because only the developing BRIC nations will be able to afford them once the Renminbi becomes the de facto reserve currency.

    How many years will it take before Chinese shirts, with shorter sleeves and an absence of gross belly space, fit the average westerner? 5?

    Don't worry though. In only 200 years time the cycle will repeat itself.
    Except we will have no oil, no forests and no fish in the seas.
    The cycles will repeat quicker from then on.

  • Comment number 79.

    30. WOTW

    Yes, I despair! De-meritocracy? He isn't getting paid but no doubt he is being rehabilitated and will profit in the future. Hegemony? I think so.

    If your average person had performed so badly they'd never work again!

  • Comment number 80.

    @Keith wrote:

    "And how would Britain export accounting, law, insurance, advertising, etc to China? How much of those items do we export to the rest of the world? How do such exports benefit Britain and not just a very few in London? The facts are that physical goods are the only things of real value to trade in this world ..."

    Simples, by advising a Chinese client on how to acquire, finance, and restructure assets outside the UK (e.g. resources in South America) and sending them a bill for £250,000 for doing it.

    The UK are world leaders in providing this sort of cross-border legal advice and the income it generates for the UK and the taxes paid by the lawyers and their support staff doing it provide massive tax revenues for the UK.

    It benefits people outside London when the lawyers and others involved spend their salaries on housing, improvements, cars/transport, meals etc. all over the UK.

  • Comment number 81.

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

  • Comment number 82.

    China is a jugernaut and we should jump on the bandwagon like everyone else, sorry- I mean, encourage investment and fair trade between our nations. Of course thats what I mean. There is a lot to respect in China.

    However there is a but. A big but. 'China' as we know it has the potential to turn itself inside out well within our lifetime. There is an argument that it is made up of states which regard themselves as virtually separate sovereign entities. Of these, of course, Tibet and Taiwan are perhaps best known, there are many more. There are different dialogues, different cultural practices and different ideas/aspirations...the people identify themselves separately to one another...where does and will this lead? Well. Who knows. But it crucially raises to the foreground human rights issues and the risk of future volatility which may concern long term investment, because we can't actually see where the current path leads.

    China carries significant bad debt- we just never hear of it. Look at their regional investment programs, write offs of 30-40% equating to billions. This is not good. They do not have all the answers. There is also no certainty that the flows of cash into China will never end. Far from it- in light of the risks long term the smart money must be on maintaining flexible investment in China.

    The only way to prove itself on the global stage will be with the arrival of civil rights in China. Then the people of China can determine their own future. Only when it becomes clear what that future is will the west lose its right to continually if not impliedly critique the way the Chinese do business and conduct their affairs. And only then will we see what they're truly capable of.

  • Comment number 83.

    59. At 4:16pm on 09 Nov 2010, Workers_Unite wrote

    Solar panels??? Who would make them if everyone is milking cows and making cheese? For this you would need accountants, marketing, banks, HR and procurement for the company to work...

    And why do people see services as not being exportable?? Get in the real world...

    Keep it going WOTW... always loving your rants and inability to accept anything another has to say

  • Comment number 84.

    Wish we had politicians and workers like they have in China .. no wingeing allowed and plain truths lived out for the country's benefit, even if human rights are infringed .. but look where our nabby-pamby approach has got us infiltrated with terrorists and civil rights advocates who cause confusion and dismay mostly

  • Comment number 85.

    58. At 4:13pm on 09 Nov 2010, Workers_Unite wrote:
    Learn how to milk a cow and make butter!

    ---
    Vasilav = Workers_Unite = Lindsay_from_Hendon methinks.
    ---
    79. At 5:31pm on 09 Nov 2010, i wrote:
    30. WOTW
    Yes, I despair! De-meritocracy?

    ---
    It's shocking, isn't it?
    The morons are in charge because that is what our theoretically "meritocratic" educational system leads to (globally).

  • Comment number 86.

    Does the desire for China to balance imports and exports extend to the oil producing states? Remembering that when the Saudis put the price of oil up in the 70s the Americans are said to have gone to them and said: that's ok as long as you use the money to buy our bonds. Should they have said: as long as you spend the money? Time to ramp up production of gold plated Rolls Royces. Australia is already getting into the racing camel business.

  • Comment number 87.

    81. At 5:41pm on 09 Nov 2010, J__Hobson wrote:
    And the 'cure' for this crisis also echoed Japanese experience ... keep the hierarchical social system there stable ...Saving the riches of the rich was a vital stage ... next stage of the attack on China ... Will the Ben Bernanke QE attack work? Well, it depends simply on whether the largest speculative bubbles are created in the US and the West or in China.
    I'm ashamed to be a Brit with a huckster government like this.


    Great post. Insight!

  • Comment number 88.

    #83 noorwich

    "Solar panels?"

    Correct but for entirely the wrong reason.
    Solar panels are useless in northern regions because you will never get the energy out of them that you put into them during their manufacture.
    Look upon them as lossy batteries.
    No matter how cheap they become they will not be thermodynamically efficient.
    And that is what counts.

    Thermals are the answer. During the winter months anyway.

  • Comment number 89.

    51 Duxtungstu

    Proper etiquette requires that the servant does not speak to his employer unless spoken to. If your employer requires that you perform in the grovelling manner you suggest then he is either some trumped up petit-bourgeois on the make or is gripped by some psychological defect.

    I come from the artisan class and we have no difficulty in speaking directly as we are experts in whatever it is we do. I enjoy direct conversation without all the hyprocritical deference so beloved of the British.

    This is all part of what is wrong with our country. Stand up and say it as it is! Make the boss take it on the Chen!

  • Comment number 90.

    #80 James B

    " by advising a Chinese client on how to acquire, finance, and restructure assets outside the UK (e.g. resources in South America) and sending them a bill for £250,000 for doing it."

    Isn't that the quickest way for the Chinese client's family to get a bill for the bullet used during the execution?

  • Comment number 91.

    The 19th century belonged to the European powers (Britain, France, Spain).
    The 20th century belonged to the USA.
    The 21st century belongs to China.
    You either live in denial and ignore the fact, or you graciously accept reality.
    The Chinese might say...."you aint seen nothing yet".

  • Comment number 92.

    "The interview took place in a magnificent and tranquil government-owned estate, the Diaoyutai state guesthouse" - good to see state socialists are the same the world over. Some really are more equal than others - like Lord Irvine's wallpaper.

    A quick quiz - did the British Empire grow mainly through

    a) brilliant individuals driving great businesses, supported by visionary government leadership

    or

    b) imperial invasion, cheap labour, slavery, drug pushing, arms dealing and protected markets?

    Pots and kettles.

    The sanctimonious, patronising, xenophobic, bleating on this blog tells me all I need to know about where this nation is heading.

  • Comment number 93.

    #76 Guy Croft

    "Mind you it should not be that hard to compete with China as most of their stuff falls to bits the second time you use it."

    Wasn't that what was being said about Japanese stuff a few short years ago.

    Now the affordable NC machine tools are made in Korea and are direct copies of Japanese originals.

    Who owns Britool - the spanner people - now?

    Like it or not Chinese made, Indian made stuff is as good as the Japanese stuff.
    And it is good.

  • Comment number 94.

    It is a great Shame that the Chinese wish to maintain their currency at an artificially lower exchange rate.

    In a every way, that is a direct subsidy to their exporters.

    What a pity.

  • Comment number 95.

    >80. At 5:36pm on 09 Nov 2010, James B wrote:

    Simples, by advising a Chinese client on how to acquire, finance, and restructure assets outside the UK (e.g. resources in South America) and sending them a bill for £250,000 for doing it.

    The UK are world leaders in providing this sort of cross-border legal advice and the income it generates for the UK and the taxes paid by the lawyers and their support staff doing it provide massive tax revenues for the UK.



    I like it.
    We export them the same idiotic teachings and policies that brought our own economy so low and allow that to even the playing field!


  • Comment number 96.

    Isn't it obvious? China does not want to buy tat like America and the UK does. If we want to reduce our trade difference - even turn it into a surplus - we need to lift the arms embargo, and sell the stuff they want and need. Take oil - we have loads from Scotland. China has a thirst for oil, they will pay over the odds for it.

    Military equipment, helicopters in particular - China is lacking in their air force capabilities - sell them a few, morals be damned, and the deficit is looking smaller already. And the ultimate prize - aircraft carriers - instead of scrapping Ark Royal we should have sold our old ones to China (we've already done it with India) and made that and another Ark Royal to replace them. America would greatly benefit from lifting military and tech embargoes to China.

  • Comment number 97.

    I am quite embarrassed by all of the lack of understanding from so many people over trade here. Do people not realise that China used standardly subsidise most exports by up to 17% / 20% - so thereby undercutting our own manufacturers, it is less now, but trade has not been fair for years. The currency is completely fixed by the Chinese government, where as we play fair with ours.

    All of the people who say we make nothing or that we are not important in trade, clearly have a persecution complex. We are the 9th largest exporter in the world, China with all of their dominance, reputation etc, only export 3.4 times what we export. (CIA year book 2009)So all of you who do not know what makes up our $357,300,000,000 of worldwide exports in 2009, suggests to me, that you all love running the UK down, and like other people and countries to be better than us, regardless of the truth of the matter.

    We make loads, we export loads, (not as much as we used to) but China as a policy has been wisely cheating to grow their economy (and taken 300 people million out of poverty doing it) but do not forget how much we all in the west have benefited from our wages being able to buy so much more value as it has been made at a lesser cost. Got a new TV - it’s cheaper because it was made there. We benefited too. Win win really.

    However, nothing lasts forever. The exchange rate needs to be flexible, as trade is imbalanced but the Chinese cannot afford to change much, as they need jobs for 10 - 20 million new workers coming to the work force each year every year, and if China ever has a recession, then workers on the streets starving would really upset matters. China needs our sales as much as we value cheap goods, but they can't keep fixing the rate, and stopping some of our companies trading there (ever tried exporting to China? - or Japan for that matter), they play protectionist very strongly. And at the end of the day, we are the customer, and the USA gvmt could start to put more tariffs and start a trade war. China would have revolution before the US for sure.

    It’s a fine line, as always, but the Chinese are not as strong as people believe, and we are not as weak or insignificant as so many people seem to want to believe either.

  • Comment number 98.

    Nearly every toy I bought my son that was made in China when he was a nipper was lethal, so much so my wife and I decided there was a subplot to wipe out all the infants in the western world to slowly eliminate the population. One particular toy gun we bought was a spring loaded job that fired suckers, however the suckers had a solid plastic shaft and the gun had a recoil that could snap your arm. We could stick a dart on a door from thirty feet, needless to say my son never got his hands on that one.

  • Comment number 99.

    "He says that China wants to buy tons more high tech stuff from both countries, but is prevented by prohibitions on the sale to China of kit that could have a military purpose"

    The one source of manufacturing that is still doing reasonably well in the West are the defense contractors. I wonder why no one has made the connection that these contractors are still here because we have protections in place and trade restrictions to China. Airbus is not considered sensitive and is now selling in China, but it's also being made in China not Europe. If Russia is any example to follow, then sending China our high tech equipment would be a horrible mistake. Russia previously sold China some of its best military technology and had a healthy manufacturing surplus, today Russian technology has been completely absorbed and the modern PLA is equipt with Russian technology "with Chinese characteristics"; Russia has been reduced to a natural resources exporter and is now importing much of its manufactured technology from China.

    The big deals from this UK-China trade summit hailed the other day included pig and Scotch exports to China. The type of the trade more characteristic of the Middle Ages than the 21st century. The West needs to back away from this ridiculous notion that "free" markets will allocate resources beneficially and move to a more sustainable model of domestic production satisfying most of our domestic consumption.

  • Comment number 100.

    "..Italian and French products are better known than British products in China ..."

    Robert Peston, you make very valid points, well reported. But in a tiny, almost missed paragraph, is the above in your report.

    So, Robert, when you return/come down from the heady surroundings of your visit to China under the courtesy of the BBC and Cameron & Co., perhaps you can extrapolate your findings to inform British companies who need to know how to appeal in the same way to China as Italian and French companies?

    BBC political and business journalists are respected - their reports and opinions are read and appreciated, globally. Not least in the UK.

    Therefore, there is still a 'duty', if you like, for ALL BBC journalists not only to report on politics/business and leads from political contacts; but to ultimately remember and respect their readers' trust more?

    Those millions who pay the BBC license fee only demand best standards from all those employed by the BBC. The BBC is owned by the public and set best standards that others envy. The majority of British people are very serious about politics and business activity outside the still inflated Westminster 'bubble'. Yes, the public are still thinking about MPs, Ministers, Opposition MPs & Ministers salaries and expenses too.

    Old news, but exceptionally relevant right now with cuts and job losses.

    Just a thought.

 

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