The New Chinese Era

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I first visited China in 1977. The London Times had arranged
to take a group of businessmen from Britain to open up trade contacts.
As Editor of The Times I was the Deputy Leader of the group
and had to do a good deal of formal handshaking. Fortunately we
were able to take our wives with us as part of the ceremonies of
speaking and feasting.

It is now thirty two years since we made that visit. The change
in China has been beyond belief. In 1977, China was still a land
of bicycles and physical labour. It was also a land of absolute
authoritarian orthodoxy. One would get on an aircraft, leaving behind
an obsequious official, spouting the party line. One would disembark
a thousand miles away, and be greeted by another official minder,
repeating the same party line, almost without a pause.

People still criticise the monolithic power of the Chinese Communist
Party, but the relative change is what strikes anyone who knew the
old China. China may not respect civil rights or allow certain kinds
of free political discussion, but the new China is inexorably much
more open and free than the old China.

That is just as well, as it is becoming apparent that the resilience
of the Chinese economy is the world’s best hope in the present depression.
If one looks at the reaction to recession of the United States,
Germany and China, one is impressed by the strength and confidence
of the Chinese response. I would list the three powers in the order
of China, the United States and Germany, for their contribution
to the process of world recovery.

Joseph Schumpeter analysed the Great Depression in terms of "creative
destruction". He thought that cyclical recessions and depressions
wiped away obsolete economic systems and allowed them to be replaced
by fresh structures. Recessions are necessary to speed up the capitalist
forces of change.

For the last 33 years, the Chinese economy has been growing two
to three times as fast as the United States, and that has continued
even in a year of recession. The Asian economy has been taking over
the lead from the Western economy, though the performance of the
Japanese economy has been disappointing.

I expect that this Chinese outperformance will continue as the
world moves into recovery. We can now see the pattern of the three
centuries: 1815–1914 the British Empire; 1945–2008, the
American era; about 2030–2100 or beyond, the new Chinese era.
China is overtaking the West and the process has been accelerated
by the recession.

10, 2009

Rees-Mogg is former editor-in-chief for The Times and a member
of the House of Lords. He has been credited with accurately forecasting
glasnost and the fall of the Berlin Wall — as well as the 1987 crash.
His political commentary appears in The Times every Monday.
His financial insights can only be found in the Fleet Street
Letter, the UK’s longest-running investment newsletter.

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