Of all the media coverage of this economic crisis, one line has stuck in my mind more than any other, and it perfectly sums up the shifting global economic axis. “This isn’t a global recession, it’s a Western recession.”
It wasn’t a headline-grabbing comment made by a leading political figure but an analyst responding to the recent economic turmoil. Neither is it a particularly contentious point to make.
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However, it was one of those ‘stop and take stock’ moments for me because it put into context the extraordinary economic changes that have taken place in the last 20 years. All this will make more sense when I tell you that the first big economic story I covered as a fledging business journalist was the Asian crash of 1997, when the Tiger economies went into freefall and Western businesses fled the markets with fingers burnt.
That the tables have well and truly turned is illustrated in more practical terms by the current spate of State visits between the Western nations and Asia.
US president Barack Obama is reported to be travelling through India with around 250 business leaders and investors.
Obama’s visit to India is interesting. He today backed the country to be a future member of the United Nations Security Council. India’s democratic credentials – albeit a little rough around the edges – plus its proximity to China, its potential importance in containing problems in Pakistan and Afghanistan, as well as its potential as a hugely important consumer goods market, make the country perfectly-placed to build much stronger ties with the US.
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By GlobalDataThere is a clear indication the US might do more to actively build up India, which in the end it probably sees as more of a natural ally than, say, China. The economic consequences could be significant.
Meanwhile, the UK’s Prime Minister, David Cameron, has been in China. A forward delegation led by business secretary Vince Cable includes some of the UK’s top business representatives, including Dave Shemmans, chief executive of engineering services firm Ricardo and Peter Voser, chief executive of Shell and Sir Kevin Smith, chief executive of GKN.
These top executives’ presence on such a visit underscores the importance of China’s booming automotive sector to these British-based companies. GKN is a major supplier of driveline components and recognises the importance of supplying to Chinese firms.
Ricardo is finding new business with emerging Chinese firms who may be learning fast but nevertheless requre high value engineering services. And for Shell, China presents a major market opportunity as the parc of vehicles in use rapidly expands.
It’s also no accident that Vince Cable has already found the time to stop and cut the tapes on a new Jaguar Land Rover showroom in Beijing. The business secretary has used JLR as an example of the opportunities on offer for British companies, though of course it is now Indian owned.
The fast-growing business class in China has proved to be an appealing target for the Range Rover and Jaguar brands. Sales of Jaguars and Land Rovers are up by 38% and 55% respectively.
Last week, France had its turn at the table. Chinese president Hu Jintao was given full military honours during his trip to Paris and the result was billions of euros-worth of trade deals between the two nations. Hu Jintao was kept away from the press; President Sarkozy presumably viewing France’s libertarian principles as a small sacrifice for taming the great Chinese Dragon.
Cameron for his part has refused to bow to the pressure put upon him by human rights activists to take China to task over this matter. After all, western nations are locked in a game for the affections of these emerging nations.
The pressure for bilateral trade with the likes of India and China has intensified since the onset of the economic downturn and the civil liberties agenda has parked to one side in the interests of financial pragmatism for the time being.
Yet despite the fanfare that has accompanied these trips, the actual numbers remain soberingly small. The UK and US’s trade deficit with China remains eye-wateringly one-sided and the UK, for example, still exports more to Ireland than the BRIC nations put together.
The JLR success, for example, – £800m in sales to China – represented 14% of all the UK’s exports to China last year.
There are of course successes, but this still largely remains an exercise in optimism rather than realism.
