Authors: Peter Barker & Gui Tao
Posted on: Guangming Online, December 7th, 2016
World’s leading economist Jim O’Neill has predicted that the relationship between China and Britain can be a truly golden one as China transitions itself to a new model of economic development.
“The UK needs the golden relationship to be truly golden. In my opinion, the emergence of the Chinese consumer is the single most important thing in the world,” O’Neill told Xinhua in a recent exclusive interview.
O’Neill won global fame for coining the acronym BRIC in 2001 to describe the group of newly emerging economies of Brazil, Russia, India and China, whose future economic performance he predicted would be a dominant feature of the global economy in the first half of the 21st century.
At the time, the Chinese economy was about the same size as Italy’s, and now it is second only to the United States, following a decade of growth through the 2000s that averaged at over 10 percent a year.
“I think the next phase that China is going through is actually more beneficial for a country like the UK, than the previous 20 years because China is moving up the value chain,” said O’Neill.
He pointed to British football as an example, with famous old clubs like Aston Villa and West Bromwich Albion now under the ownership of Chinese firms, and Manchester City having extensive Chinese business partnerships.
O’Neill, who is a passionate and life-long fan of the Manchester United Football Club, observed: “Look how many British football clubs China is trying to buy.”
“And so with health and education and value-added manufacturing and services businesses this should be a good era for the UK to do well from China.”
In 2015, bilateral goods trade between China and the UK stood at 78.54 billion U.S. dollars, and in the wake of the UK’s referendum result to quit the European Union(EU), increasing trade ties is one of the top priorities of the new British government.
UK Chancellor of the Exchequer Philip Hammond said in a speech in the southwestern Chinese city of Chengdu in July, shortly after stepping into his new role, that enhanced bilateral trading ties would be a benefit to all.
“Specifically, [I see] the opportunity to increase both British business with China and Chinese investment in Britain, especially in the financial service sector,” Hammond said.
The two countries have witnessed closer economic ties in recent years. The UK was the first Western country to join the China-initiated Asian Infrastructure Investment Bank, while Chinese companies have invested big in London’s real estate market.
CHINA MANAGING GROWTH
China’s remarkable success in economic development began with the reform and opening up in 1978.
The double digit growth rates seen through the 2000s have given way to a more manageable growth rate, as China transitions its economic model.
China’s GDPexpanded 6.7 percent year-on-year between January-September 2016 to nearly 53 trillion yuan (about 7.7 trillion U.S. dollars), according to data released by the National Bureau of Statistics of China in October.
The latest figure is within China’s annual growth target range of 6.5 percent to 7 percent.
“China is today about 12 percent of global imports, the EU about 14 percent, the U.S. about 15.5 percent. If somebody said 30 years ago that China would be 12 percent of global imports they would have said you are nuts, but it is,” said O’Neill.
“And sometime before the end of this decade they will be a bigger importer than the EU. That means to me that watching what happens to the Chinese consumer is the most important thing in the world. So as long as the Chinese consumer continues to grow, that basically makes me reasonably optimistic despite problems everywhere else,” he added.
Officials have said that China’s fundamentals for long-term economic growth remain sound while its economic performance remains stable on the whole and in line with expectations, as the economic structure continues to improve.
For the longer term, the Chinese government has said the economy had intrinsic tenacity, huge potential and ample leeway. China will persist with proactive fiscal policy and prudent monetary policy, while pushing supply-side structural reform.
Although new engines of economic growth are picking up steam, the government said the transition from traditional to new engines takes time.
O’Neill said the transition was underway.
“A couple of years ago a lot of skeptics said there is no way Chinese consumption will continue to be strong if Chinese investment slows. But if you look at this year what has happened? Chinese investment has slowed sharply and Chinese consumption is not as strong as it was but it is still growing by about 10 percent,” he said.
“Chinese consumers’ share of GDP is slowly rising. That is what the world wants, and that is what China wants.”
‘CHINA IS CONTINUALLY TRAVELING’
When O’Neill unveiled his insight on the BRIC nations in 2001 he foresaw growth for all, but China has outperformed his expectations, particularly this decade as both Brazil and Russia have seen economic growth slow considerably in the face of subdued global consumption demand.
“China is the only one of the BRIC economies which so far this decade has grown by more than I would have assumed at the beginning of the decade,” said O’Neill.
The slowdown in China’s growth from the heady years of 10 percent or more annual growth to the more modest 6.5-6.7 percent now is both understandable and necessary.
“Yes of course China is slowing but for someone like me it was pretty obvious it was going to slow; it is not surprising; it has not slowed as much as I thought,” said O’Neill.
“This idea that there is some kind of endpoint, hard or soft landing for China, it is ridiculous. China is continually traveling, it is not like being… at the end of the runway, where somebody can say China has had a soft landing. China has got a number of enormous challenges that will continue all the time.”
O’Neill forecast that for the rest of this decade China’s economy will probably grow at between 6 percent and 7 percent, and for an economy that was about 11 trillion dollars in size that was “pretty good.”
“In the scenario that made the whole BRIC thing so popular, I assumed that by 2050 China would be growing on average by about 3 percent, and I don’t see any reason to change that view.
“What I regard with great amusement is people saying ‘Oh no, China’s growth is slowing down!’ And I think, what, you expected China’s growth would be 10 percent forever! That is really naive,” he said.
O’Neill said he is still proud of the BRIC idea today.
“Today, all four of the BRIC economies in dollar terms are bigger than I thought they would be 15 years ago,” the economist said. “If China grows by 6 percent, China alone will be contributing more to global growth than the U.S..”