There are also those who have a very contrarian view arguing that while it would be very convenient for everyone concerned if China did carry on regardless with rapid economic expansion, it is by no means assured.
“All emerging countries face challenges, some more than others, and in the longer term China may not be the emerging market that delivers the best returns for investors,” says Tim Cockerill, head of collectives research at Rowan Dartington.
As you will be able to read in December’s issue of Portfolio Adviser that published next week he gives a very coherent argument about what some of the headwinds facing China are and, to paraphrase the Surrey and England-cricketing giant Jimmy Ormond, it is not even the best emerging economy in Asia.
Ahead of the publication of his book that reviews what he describes as the single term by which his career has largely been shaped – BRIC – the chairman of Goldman Sachs Asset Management, Jim O’Neill, puts the whole emerging economy into context. He is incredibly bullish about their future, remarking that his “only regret” on his first BRIC analysis of 2001 is that “we weren’t bolder”.
The scale of their growth surprised him and he is now as supportive of their future potential even in the face of those who say it was the product of “a freakish and unrepeatable set of circumstances; rapid export growth, the commodity boom and unsustainable US demand”.
What it also indicates is a change in the economic power with the make-up of the current G7 and G8 and a shift in power within the IMF and the G20 establishments necessary.
For example, between 2001 1 and now Brazil has overtaken Italy as the world’s seventh largest economy; China has overtaken Japan to become the second largest and will have the US in its sights within another two decades. Yet Italy and Japan are founding and existing members of the G7, Brazil and China are not.
Which do you think will be the economic power-house of the next few decades – Brazil or Italy? China or Japan?
The IMF needs to reorganise itself to be a true reflection of the current economic global hierarchy and then hopefully the G7 can then change as well. The UK may be one of those that falls by the wayside in this global redistribution of clout, but that is probably an accurate reflection of where we are anyway.
