China is playing a shrewd long game
The west needs to take seriously the Chinese success story. It also needs to be aware that if too much technology and too many raw material deposits are sold, earning our living will be more precarious and difficult, writes The Rt Hon John Redwood MP
The future is China’s for the taking. In the story so far, very hard working Chinese have built a huge surplus from successful exports. They have more than $3 trillion in the reserves. Millions of people have left the land and moved into more productive jobs in factories.
China has grown to understand western markets, to design and produce goods that the west wishes to buy. She has lent money back to the west to help maintain the west’s spending. She wishes to avoid dollar or Euro collapse, to maintain her competitiveness against these large currencies, and to protect her investments through her reserves. There are many more Chinese who can move into better jobs, earning more for China. There is huge scope for Chinese expansion based on expanding domestic demand and higher wages.
In her latest five year plan China recognises that there are limits to how much she can sell a west becoming overstretched financially. She also is aware that the Chinese people will themselves expect to benefit rather more in the next five years from their energy and productivity. Chinese people will want to buy the fridges and cars, radios and cycles that China can produce in large numbers.
China is now using her financial muscle to acquire resources and technology. She is buying into important raw material deposits around the world, recognising she will be the main consumer of these items and will need privileged access to them. She looks to the west for technology. China wishes to move rapidly to equal or surpass the west at designing and making computers, TVs, cars, machine tools and the rest. She is prepared to buy into western companies with good technology to gain title to it.
Some years ago I remember being asked by a distinguished Chinese visitor to the UK why the UK government had not got behind one of its companies bidding for a Chinese project. The UK had not won the competition. My guest was explaining the importance of government engagement and backing to the Chinese purchasers of that time. I explained that the UK government had not been able to, owing to the fact that more than one UK company was bidding. The UK government does not see it as fair to back just one UK company and denigrate or ignore the rest. My Chinese visitor saw our competitive system as a weakness in this case. The UK government could not back one company and instruct others to back away from the competition, as China would have done in a similar position. China also grasped that the west is fairly free with the sale of companies and technology in many fields.
China has learnt that competition does have its role to play. She has also learnt that freedom, competition and western style democracy can leave the west vulnerable to Chinese competition, and to informed Chinese buying of technologies and resources that have strategic significance.
But China has a different view of how to govern from the west. She runs a different system from competing party elections and western style law codes and has developed a system for listening to public opinion, and for trying to avoid protest or mass disagreement with government policy.
China is busily buying up gold, showing her worries concerning the west’s paper currencies. Whilst she talks about supporting the Euro, she backs gold. Maybe part of her strategy is to build a very large gold position, then one day to seek to remodel the world’s monetary system with a new role for gold.
The UK’s short sighted sale of gold at low prices looks increasingly foolish, as Central Banks, as well as individuals, look for a safer haven than low yielding paper money subject to the vagaries of quantitative easing.
The west needs to take seriously the Chinese success story. It also needs to be aware that if too much technology and too many raw material deposits are sold, earning our living will be more precarious and difficult.
The Rt Hon John Redwood MP is the Member of UK Parliament for Wokingham and the Chairman of the Conservative Economic Affairs Committee. His articles are cross-posted on his blog by agreement
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