We were a fool in the China shop but not anymore....
- Published Date: Monday 14th March 2011
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China has appeared to be immune from the financial crisis that has damaged economies across the globe.
As the rest of us face economic uncertainty, cuts and unemployment, China has assumed the position of the global superpower.
With this seismic shift in economic power from west to east, China has emerged strongly as a manufacturing centre of excellence and developed a booming export operation.
The simple truth is that rest of us have been borrowing money from them to keep our heads above the water, and then using this money to buy things back off them.
Sure it works if you’re Chinese, but it’s not helping us.
Britain’s problem stems from the fact that we have become a nation of servers and stopped making things.
With this comes a greater reliance on foreign imports from countries like China.
China, backed by a weak currency which makes its goods more affordable and competitive on the global markets, sends container ships full of goods over to us.
And the only real volume we have been sending back has been our waste, yes China is even recycling for us.
Our growing trade deficit from imports to exports has become a major problem and Chancellor George Osborne rightly made it a key discussion point during the televised election debates.
Cue high profile trade envoy visits to China and India after sweeping into power.
In my review of 2010 I said that I hoped the meetings would secure inward investment and trading opportunities for a private sector that will need to absorb the significant public job losses.
And last week we started to see some results.
Latest figures show that UK manufacturing grew at its fastest rate in 16 years after output grew 6.8 per cent in the year up to January.
And booming demand for UK goods has driven exports up 5.4 per cent to all time high of £25.1billion.
China is now seeing a drop in exports and a rise in imports, a trend we are now fully exploiting with sales to China growing by 12 per cent.
Now the relationship with China is starting to work for us.
In general we are starting to claw the global trade deficit back, with the Office of National Statistics figures revealing that the gap between goods imported and exported narrowed by more than expected to £7.1 billion in January from a record £9.7 billion in December.
These latest figures add to hopes that the UK economy may have recovered in the first quarter of 2011, after it surprisingly declined by 0.6 per cent in the final three months of last year.
However some analysts have warned against complacency, highlighting that manufacturing only makes up around 13 per cent of our total economy and will have a lesser impact on growth.
Some have pointed to weaknesses on the consumer side of the economy, which may be unfounded given that John Lewis reported a healthy upsurge in profits last week.
I agree that the recovery will be fragile and uncertain for some time.
But I’m worried that we are in danger of talking ourselves back into a recession.
If you listened to the doom mongers and the Labour attack dogs, you’d be forgiven for fearing we are on the precipice of further economic meltdown.
But we aren’t.
Latest stats show that exports are growing, manufacturing output is on the up and the number of full-time jobs in Britain rose at the fastest rate for ten months in February.
UK business has been expected to pick up the slack as the public cuts start to bite, and these figures show it is responding to the challenge.
The country is performing well and its time Messrs Cameron, Clegg, Osborne and Cable started shouting about it.