The Chinese are coming! “What are we going to do now?” (Asked Spike Milligan)

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It cannot have escaped people’s notice that China is getting stronger economically and may overtake the USA as the world No. 1 economic power in less than a decade. She already holds a huge stockpile of US bonds & her foreign currency reserves are in $Trillions; there is already talk about the Chinese Yuan becoming the “Reserve Currency” in place of the US$, and that will give her the edge over other nation states in world trade and currency conversions. Militarily, China has the largest army, with over 3 million members, making the People’s Liberation Army the largest employer in the world.

She has also been investing heavily in Africa where a lot of the world’s resources can be found. European sovereign debts? Yes China has bought plenty of those too. She is on a war path, an economic one. The long term plan? Takeover the world of course, but doing it before oil starts running out in probably 20/30 years’ time. By then, she will have built up her infrastructure and power for world domination.

Should the West worry? Oh yes! Unless the West can compete with China (and the likes of India), it will slowly go into economic decline. Asian countries have different familial, educational and social cultures, plus “hard work” ethics which seem to be hardwired into the Asian psyche. A little known fact is that in China, private enterprise produces up to 70% of her GDP, communist she isn’t. Also, the Chinese/Koreans/Indians are far more productive & efficient per capita than their Western counterparts. (loose language alert – I meant the goods & services from these Asian countries can be produced & sold more cheaply due to cheaper labour costs, I do not mean they have higher GDP productivity per capita than the West)

One might say Chinese workers should be paid more and the wealth held by so few in China should be more evenly distributed. Well, nearly a quarter of the world’s population lives in China and that is a handsome source of cheap labour. One can always pray & hope that Chinese wealth will be spread more evenly but that is unlikely to happen for a long time yet. If anything, the Chinese thinks the West is lazy and has an entitlement culture.

China also has a stable political system, whether you agree with it or not, and which facilitates long term strategic planning and control over the nation and people. Some call it State capitalism, the ruling party calls it socialism with Chinese characteristics. We in the West cannot rely on what the Chinese may or may not do in the future, we need to think about concrete solutions now.

So how can the West compete? This country has been too reliant upon financial services and the consumer credit/proper bubbles in the last decade. People have enriched themselves, paradoxically, on debt. UK has fallen behind others in the EU like Germany on manufacturing, and certainly well behind China. Even the EU countries and the US are now experiencing low growth and the situation could become worse. There will be sovereign debt crisis in Europe if the current profligate paths remain unchanged, Greece will be the first to fall….

Will UK Plc catch up with China? I doubt it. We might disagree with how Chinese businesses employ workers but the fact is pound for pound, the Chinese can produce goods far more cheaply than we can. Will foreign investments be diverted to China and other Asian Pacific countries? And how about financial services that we have come to rely upon so heavily? Well, we are seeing world’s largest banks moving more resources to the East, that should tell you something worrying.

I am not an expert on world economy but I can see that unless things change, this country will become poorer and poorer… lower foreign investments (remember our high taxes?), lower national income from financial services and exports, trade imbalance, stagnation/fall of wage levels & property prices, longer working hours, a smaller social security safety net? But at the same time larger pensions & NHS bills (to cater for the fast ageing population). I note here that China also has that problem due to her “one child only” policy. Another reason why she must build her strength now before the old outnumbers the young in China.

Can our government afford to spend what it has been spending in the last few decades? The answer must be a resounding “no”. We are swamped in debt in this country, the State, the people & our companies, it’s not sustainable. Of course, the structural deficit has to be dealt with and we must encourage private sector growth. There have been many arguments in the public domain about cuts to services and welfare benefits BUT, unpalatable as it may sound, we do need to think whether we should voluntarily let our collective “standard of living” fall say by 25% or so in order for UK plc to compete with the East, before we are forced to ….

The Chinese are coming, we are the takeaway.

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About Art Li

Briefly, I am a lawyer, keen amateur photographer, dog lover and politics junkie but not a member of any party. Full details on Biography page. Follow me on Twitter @Art_Li.
This entry was posted in Economy, Politics, Public Spending Cuts. Bookmark the permalink.

4 Responses to The Chinese are coming! “What are we going to do now?” (Asked Spike Milligan)

  1. Jen says:

    I suspect the problem with ‘voluntarily’ reducing standards of living will be those that are at the top (rich & powerful) will volunteer those at the bottom.
    The ‘squeeze’ on incomes for the majority, alongwith the cuts to services and benefits, whilst, at the same time the richest increase their wealth, would seem to indicate that this process is happening.Forget the Chinese: nationalist economics is so 20th century! What we will have is an economic elite tied to no country (living wildly extravagant lives) from across the world bullying nation states into impoverishing their own people with threats of disinvestment.

    However, all is not lost. There is some evidence that globalisation will not lead to a race to the bottom in that below a certain point in the provision of welfare systems, corps perceive a cost and thus demand some level of state support. Traditional support systems in the East are already under strain & some have argued that informal familial support will have to be better supplemented by better state support more akin to the West if growth isn’t to be stalled.

    Finally, for all its faults we do live in a democracy. We can demand better of our govts than kowtowing to a global elite. Maybe even the Chinese will demand better from their govt. Many of the concessions made to ‘the people’ in the West in the 19/20th century were made by elites who wanted to prevent a revolution which might threaten their elite status. Similarly, there will be a limit on what ‘squeeze’ on living standard is acceptable. If the Elites get this wrong they lose everything

    • Art Li says:

      Thanks Jen for the comment, I agree the average Chinese will demand more – political rights as well as better standard of living – but that will not come in a hurry. I believe it will be unwise to ignore Nationalist economics for being 20th Century. Let’s not forget China’s path was slowed/diverted by more than 3 decades of “Cultural Revolution”. This is the nominal 1980s boom for her. As for those “Elites”, many of them are and will be Chinese and most Chinese have strong nationalistic & emotional ties to the “Land of our Ancestors”. Finally, she is increasing her military spending even further to strength mobile air platforms (carriers)…. I’m not suggesting a Genghis Khan invasion (so 12th Century!) but the Yuan will be mightier than the sword…

      • Jen says:

        True – but experience in the West would seem to indicate that the more detached the elite become from the masses, the looser the ties with the ‘Land of their Ancestors’
        Look at what the elites of the 19th century in the UK provided in terms of endowed facilities for their local communities in comparison to now. They were rooted in these communities (even if there was an element of willy-waving as well).

        Nevertheless I suspect nationalist economics will remain important in the rhetoric, not least because it will be the only thing left for nation-states to appeal to – “Sorry your standard of living is so bad, it’s not our fault, it’s the pesky Poles/Indians/Chinese [delete as appropriate]”. England has done that since the Statute of Jewry in the 13th Century (if not before).

        Btw 40 million Chinese men without wives (recent Newsnight report) might indicate a greater likelihood of a military adventure.

  2. Art Li says:

    I agree the Western experience is as you indicated, hence I particularly emphasised in my post the different Chinese (or even Asian in general) familial, educational and social cultures. Yes I saw that Newsnight report, hence in a moment of mischief, I tweeted about the Chinese coming to collect their European Takeaway, money and wives 🙂

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