The New Chinese Era

I first visited China in 1977. The London Times had arranged to take a group of businessmen from Britain to open up trade contacts. As Editor of The Times I was the Deputy Leader of the group and had to do a good deal of formal handshaking. Fortunately we were able to take our wives with us as part of the ceremonies of speaking and feasting.

It is now thirty two years since we made that visit. The change in China has been beyond belief. In 1977, China was still a land of bicycles and physical labour. It was also a land of absolute authoritarian orthodoxy. One would get on an aircraft, leaving behind an obsequious official, spouting the party line. One would disembark a thousand miles away, and be greeted by another official minder, repeating the same party line, almost without a pause.

People still criticise the monolithic power of the Chinese Communist Party, but the relative change is what strikes anyone who knew the old China. China may not respect civil rights or allow certain kinds of free political discussion, but the new China is inexorably much more open and free than the old China.

That is just as well, as it is becoming apparent that the resilience of the Chinese economy is the world’s best hope in the present depression. If one looks at the reaction to recession of the United States, Germany and China, one is impressed by the strength and confidence of the Chinese response. I would list the three powers in the order of China, the United States and Germany, for their contribution to the process of world recovery.

Joseph Schumpeter analysed the Great Depression in terms of “creative destruction”. He thought that cyclical recessions and depressions wiped away obsolete economic systems and allowed them to be replaced by fresh structures. Recessions are necessary to speed up the capitalist forces of change.

For the last 33 years, the Chinese economy has been growing two to three times as fast as the United States, and that has continued even in a year of recession. The Asian economy has been taking over the lead from the Western economy, though the performance of the Japanese economy has been disappointing.

I expect that this Chinese outperformance will continue as the world moves into recovery. We can now see the pattern of the three centuries: 1815-1914 the British Empire; 1945-2008, the American era; about 2030 -2100 or beyond, the new Chinese era. China is overtaking the West and the process has been accelerated by the recession.

William Rees-Mogg
for Markets and Money

William Rees-Mogg
Leading political editor William Rees-Mogg is former editor-in-chief for The Times and a member of the House of Lords. He has been credited with accurately forecasting glasnost and the fall of the Berlin Wall – as well as the 1987 crash. His political commentary appears in The Times every Monday. His financial insights can only be found in the Fleet Street Letter, the UK's longest-running investment newsletter.

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“China is overtaking the West and the process has been accelerated by the recession.” Is that right William? Such bold claims with not too much backing too them. Perhaps I should go buy myself some Chinese stocks on your advice then? I will tell my colleagues “i’m backing China, because China of today is different to China 30 years ago”. Seriously though, you are calling waaaay too soon. This is akin to officials and experts here in Australia saying that our Real Estate bubble has strong support, because ‘it has not deflated yet, and everyone elses has’. How about we… Read more »
Pete if the USD is to be worth nothing the capital generating/exporting country’s savings get extinguished and they were generally leveraged in USD into those USD assets too so thats one big kabbam! As the global reserve/trade finance currency you are also talking about an implosion in trade and the underlying trade credit even if it devalues significantly. So you yourself are taking a big leap calling it to be “worth nothing”. The difference is the reserve status, technically the US can print lots in the domestic economy. China was so inefficient & lazy in the old days, my dealing… Read more »

I can’t help but laugh at someone who says things like

“….Such bold claims with not too much backing too them”

and then

“Maybe China won’t be so rich when the USD is worth nothing”

classic thought process of a muppet.

what will China do? First it will use reserve currency try to buy most Australian resourse as it can because Australia to close to China, safety to transport and shortest way to protect when necessary. At the same time China try to help the dictated african governments, the countries which rich resource, in order to get cheap material. Second, China will determine to develop heavy industry such as weapon, airplanes, tanks, battle ships, submarines, etc…at the same time China will try interfere, with intention to control most south east asian contries then to Australia. No one know if It will… Read more »
Jon Bain
The one-child policy will ruin China. It may have been necesary, but the generation which grew China, is no the same as the one which is going to inherit it. Spolit children do not hard workers make. China also has a massive ideological contradiction. The rural who are going out of work, will exploit the idea that the Communists are not Communists. I see China imploding in a worse way than the US or Britain will. The new world leader? The federation of Gondwanaland comprising mostly Southern Hemisphere countries and India under a single currency. ok. So its far-fetched. But… Read more »
In the bubble after the 1987 crash it was Japan that was going to overtake the US – didn’t happen. In the bubble after the crash it was China that was going to overtake the US – won’t happen. China is going to collapse into anarchy and/or civil war and most likely balkanise, as with the US. History does suggests to look East, but from an American geographical position, for a brief reign of the entity to replace American hegemony. “Every modern transition of world power supremacy has involved an ally or former colony of the previous hegemonic power”… Read more »

Europe is doing a USSR. It will implode due the huge productivity & banking regulation disparity in the Eurozone (which must be seen to incorporate all those east european countries with access to euro denominated borrowing & fixing rates even if they still nominally run their own currency). Ukraine, the caucases and the baltics are also just the same total basket cases they were when they were within the ussr.

I also believe that the present European Union will collapse. When I look at Europe I see the Weimar Republic. “… despite the myth of a reunited Europe, Europe has redivided along historical-civilizational patterns, with the recently expanded NATO a variation of the Western Holy Roman Empire…” (Robert Kaplan, The Coming Anarchy, p.182). Germany has an “ethnic concept of nationhood” [and] “still dreams of a Germanic Holy Roman Empire” and has yet to “recover from the aberration of Nazism” – Jean-Pierre Chevenement, French Interior Minister, May 2000. What I am more interested in is the political system, comprised of ten… Read more »
The next world power will be the one that is best able to persue science and technology, Europe, bracketed by commenter Watcher7, Catholic, will indeed be held back by it’s adherance to religious code. Likewise the U.S., It’s religious dogmas have a stranglehold on society and the persuit of technology, they all belive God will provide, I don’t know why they don’t put their faith in themselves,as I’m sure they are all capable, but if the want to trust God to make their lives better so be it. So then who does that leave to be the world power, New… Read more »
. The crushing of the Imperial Chinese state happened in 1860 with the summer palace burning in the background , the Manchu dynasty signed the Beijing convention , in fact an abject surrender germane to the thread , the Opium wars were caused by the west trade imbalance with China , they didn’t really want anything from the west only silver was accepted . It couldn’t last the whole international trade was going to the dogs after the wars the forbidden city woke up to the desirability of western weapon technology . China is now totally dependent on sea borne… Read more »
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