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. 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 travelling through India with around 250 business leaders and investors. He has been accompanied by Indra Nooyi, CEO of PepsiCo, who described India as “a glorious opportunity” and today announced a joint venture with the powerhouse conglomerate Tata Group.
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.
There is a clear indication that 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, today (9 November) touched down in China. He joined up with a forward delegation led by business secretary Vince Cable that includes some of the UK’s top business representatives, including Tesco executive director Lucy Neville-Rolfe and George Weston, chief executive of Associated British Foods.
ABF will be looking to bolster its food ingredients and retail business in China, where it already has a substantial presence. Weston took time out from the visit to appear on a conference call this morning discussing ABF’s annual results – which included details of the growth the company is seeing in China. The ABF chief said the trip was a “rare opportunity” to accompany the UK Prime Minister to such an important market. “We get all sorts of access to people we wouldn’t normally see,” Weston said.
Tesco also has plans to expand its presence in China, where it already operates 99 stores across nine provinces, employing 23,000 people. Today, Cameron visited a Tesco store in Beijing as the retailer sought to demonstrate the “very dynamic and exciting business” it has in China. In the 26 weeks to 28 August, Tesco generated GBP498m (US$795.9m) of sales in China. Same-store sales were up 6%.
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.
There are of course successes, but this still largely remains an exercise in optimism rather than realism.