Despite declining growth, Scottish business leaders are talking up trade with Beijing
It was not the most auspicious of starts to a month which sees the launch of a series of lectures designed to boost trade between Scotland and China.
Chinese manufacturing activity contracted in August as new orders fell. The report, published on 1 September by the state-authorised China Federation of Logistics and Purchasing, added to mixed signals about whether China is starting to recover from its deepest economic downturn since the 2008 global crisis. The slump comes at a sensitive time for the Communist Party, which is preparing to hand power to younger leaders this year.
China’s economic growth fell to a three-year low of 7.6 per cent in the quarter ending in June, and corporate profits and other indicators have fallen despite government stimulus measures. Analysts expect an economic recovery late this year or early in 2013 but say it will be too weak to drive global growth without improvement in the United States and Europe.
Beijing has cut interest rates twice since 1 June and is pumping money into the economy by encouraging investment by state companies. But authorities are moving cautiously after China’s huge stimulus in response to the 2008 crisis fuelled inflation and a wasteful building boom.
A slowdown in China, perhaps the country that European companies have most pinned their hopes on for growth as domestic markets slump, could hurt UK companies. But this will not stop business and the UK and Scottish Governments from encouraging greater trade and cultural links. This autumn, leading Chinese and Scottish business figures will deliver a series of lectures in a bid to encourage more trade and economic activity between the two countries.
The talks are being organised by the University of Edinburgh’s Confucius Institute for Scotland. Speakers will include Clyde Blowers founder Jim McColl, Standard Life chief executive David Nish, Peter Budd of Arup Scotland and Dr Liu Li, chief architect of one of Beijing’s leading architectural design companies. Organisers said the lectures, which begin on 27 September, would provide an insight into understanding how trade opportunities for Scottish firms can be best developed.
“As patterns of trade change in both the East and the West it is vital that Scottish businesses understand the background dynamics that underlie current and future economic and commercial relationships with China,” said a spokesman. “This series of talks from expert speakers aims to deliver awareness and stimulate debate on Scotland and Scottish business engagement with China.”
Figures released by China’s consulate general in Edinburgh earlier this year suggested trade between China and Scotland had more than doubled in the past decade. In 2011 the two countries engaged in almost £1.5bn-worth of business. Whisky alone generated £57m-worth of sales in China in the year to June 2011, while healthcare and renewable energy have been identified as growth areas.
The continued interest in links with China is reflected in the growing number of people wanting to learn the language. While knowledge of Mandarin remains low in Europe – around 0.2 per cent, according to EU figures – the numbers wanting to learn are climbing; on average, 6 per cent of Europeans think of Chinese as the most useful foreign language (up from 2 per cent in 2005), and 14 per cent think it is an important language for their children to learn (also up from 2 per cent).
Inversely, there is a drop in the number of people who feel that way about either French or German.
Earlier this year, the Scottish Government revealed that more than fifty young people from Scottish schools would take part in a unique opportunity to visit China to improve their language skills and experience its rich culture. Each pupil will take an intensive Mandarin language tuition course, experience a range of cultural activities and travel within China before receiving an SQA accredited qualification once they complete the course.
Minister for Learning, Languages and Science, Dr Alasdair Allan, said: “This is a fantastic opportunity that I am delighted to support. The Scottish Government is continuing to advance our relationship with China and it is important that we help young Scots to understand more about China, its language, history and culture.
“We are committed to preparing our young people to flourish in the modern globalised and multilingual world. Our work with the Confucius Institute for schools is helping to make Chinese part of the suite of languages on offer at school, aligning well with our plans to help all pupils learn two other languages in addition to their mother tongue.”
Despite the recent wobble in China’s growth, its role as global economic powerhouse is a fact of our times. The size and industriousness of the Chinese population and the country’s industrial capacity will ensure a continually increasing role in the global economy. Last year, China overtook the United States as the world’s largest manufacturer. Overall, it has the world’s second largest economy and is slated to overtake the United States by 2020. This is astounding given that only 25 years ago, the Chinese government contributed less than 2 per cent to global GDP and now it makes up roughly 9 per cent of global GDP.
Then, China was an impoverished country with low income levels, poor infrastructure and a largely agrarian economy. Under the leadership of Deng Xiaoping, China’s economy began to pull away from the constraints of communist state-planning. The reforms began in the agricultural sector and were gradually extended to the industrial and service sectors. These reforms included legislation allowing the creation of private corporations and opening up the country to foreign investment.
Over the past two decades, the Chinese economy has grown nearly 10 per cent, on average, each year. In 1990, China was still a developing country. Today it is firmly within the ranks of middle income countries and on its way to joining the wealthy world. The standards of living in China have not yet reached those of the wealthier countries in the Western world.
Outside the major cities, the country still has a long way to go in terms of becoming a developed country. There are endemic problems of corruption, inefficiency, public health and serious environmental challenges. However, the sheer number of Chinese and the shift from low to medium income levels has meant a significant increase in the buying power of a huge number of people.
As a result, the Chinese impact on the global economy has been tremendous; better understanding is at the heart of increased trade and cultural links.