UK can’t rely on China for growth, the opposite of the BBC says

There’s been a lot of lightweight news articles recently about the UK being dragged down by political uncertainty, but when you look at the figures it was already down: the shocking graph above showing the deterioration of UK Balance of Payments is from UK statistical office:
This Sunday Times excerpt from 2014 has some background:

I remember a few decades ago the trade deficit was supposed to be balanced by invisible earnings generated by the city of London.  That hasn’t been going well recently….
It seems there was never any realistic plan to address this – and the failure of the political system to address the economic issues in large part explains the voting behaviour.

The current option seems continued devaluation of the pound:
We can guess some of the outcomes for that: one is falling GBP makes UK property more attractive to foreign investors and less affordable for British people.

But let’s address China: today BBC quotes former chief economist of the International Monetary Fund as saying a possible fall in China’s growth would be the main concern.

Now there’s a graph of recent China balance of payments here, and for completeness the US here.

So, all other things being equal, continued or increased growth of China would surely result in the increased enrichment of China.
Unless something drastic happened to the balance of payments, this would be at the expense of UK and most of the rest of the planet.  So the biggest threat to UK would be continued growth in China, not a fall in China economy.

There is a hope that as China’s economy changes and generates more internal demand for goods and services, that this will allow developed countries to increase export value and grow their economies.  This is a fallacy.  It sounded plausible a few years ago, when it seemed that Chinese technology was based on copying western technology, but this is demonstrably no longer the case.  China has completed technology transfer in many areas and is now producing goods and services that equal or out-innovate the rest of the world.  There are Chinese suppliers ready to meet booming Chinese demand, the business won’t automatically go to UK and other western countries.  Yes we all enjoyed the story about a rich Chinese kid buying 7 iPhones for his dog but that’s a good story that won’t be reflected in economic reality at the macro level.


2 thoughts on “UK can’t rely on China for growth, the opposite of the BBC says

  1. nice one today on social media about Chinese employers attempting to ban iPhones in favour of domestic products, just reinforcing the point, growth in Chinese economy won’t necessarily result in the expected increasing demand for western products:


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