China's great leap forward


What does the advance of China to become the world's second-biggest economy mean to us?

The first thing is to get the great leap forward ahead of Japan into perspective.

It's easy to point to nouveaux riches Chinese consumers snapping up luxury goods, but most are still very poor.

In terms of income per head, China comes 95th in the world, ahead of Namibia, but behind Belize.

If you measure an economy's success by the well-being of most of its population, Japan, or the UK for that matter, is still a far better place to be.

Nonetheless, only a fool would seek to downplay the importance of the rise of China, which has far-reaching implications, in particular for the US. The mutual dependence of these two countries is marked by mutual distrust.

The populist view in the US is that the Chinese are destroying American manufacturing with cheap imports bolstered by an artificially low exchange rate.

A more sophisticated version of Beijing-blaming is the suggestion the Chinese are responsible for the credit crunch.

Never mind regulatory failure, the argument goes: insatiable demand from China for US Treasury bonds pushed down their yields, making them unattractive to other foreign investors and encouraging Wall Street bankers to invent sophisticated new instruments, with results we all now know.

For their part, many Chinese people are convinced their government lost huge sums on US investments during the financial crisis, including on housing giants Fannie Mae and Freddie Mac.

The Chinese propensity to save is as marked as the Anglo-American love of spending and borrowing: one Sun Quan, a 40-year-old farmer and coal miner interviewed by the Wall Street Journal yesterday, was dismissive of China's promotion up the economic league table and bemoaned the fact he can now only save a third of his annual income of less than £3,000 a year, instead of more than half, as he did previously.

The US, where President Obama announced plans to cut the deficit by more than $1 trillion over the next ten years, is heavily in hock to China.

Its trade deficit with that country hit a record high of nearly £170bn last week as imports to America rose by almost a quarter last year.

At the root of the global imbalances is the absurd fact that low-waged Chinese workers are producing goods they could never afford to buy themselves, to sell to American consumers whose lifestyles are underwritten by US government borrowing from Beijing.

America needs to save more and export more. China needs to do the opposite. It sounds simple, but it is not.

The emergence of China as an economic superpower is likely to involve enormous upheavals, both for the Chinese and the rest of the world. But like it or not, the global balance of economic power is shifting.

A life in style

The death of Raymond Burton CBE at the age of 93 marks the passing of a piece of High Street history.

His father, Sir Montague Burton, who arrived in the UK as a Lithuanian refugee in 1900 at the age of 15, borrowed £100 to set up the menswear chain which he ran until his death in 1952.

Raymond took over the business, which he in turn ran until his retirement in 1982, founding the modern Burton Group and its most famous brand, TopShop.

In its heyday, the company's Leeds clothing factory, where my paternal grandfather once worked, was the biggest in the world, supplying the nation with demob suits and outfits for Sunday best.

It is also said to have given the nation the phrases 'gone for a Burton' and 'The Full Monty', though the original meaning - it referred to a three piece suit - is rather more decorous than the film of the same name suggests.

Raymond Burton was chairman of the Jewish Museum, and a devout Yorkshireman.

Oil's well

GE's £1.75bn purchase of the well support division of John Wood, the Aberdeen oil services group, comes hard on the heels of its £800m takeover of another British company in the sector, Wellstream.

Analysts reckon it is an attractive offer for shareholders who will see £1bn returned to them, most likely through a buyback or special dividend.

It's quite a turnaround for GE, which in the financial crisis had to tap the Federal Reserve's rescue programmes to the tune of £10bn.

But it's also a shame to see another slice of the UK's thriving oil services sector pass into overseas ownership.