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China: no longer a 'workshop economy'

How will China's rise to a global economic superpower affect the West?

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Photo Credit: Aaron Dan
Photo Credit: Aaron Dan

The economy grew by 0.3per cent in the first three months of 2013. Is this news to rejoice at? Or proof that Britain, like Japan before it, can expect years of economic downgrades, stock market downfalls and downgraded deficit forecasts?

Growth figures over the past year have been very peculiar and very uncertain; three consecutive months of negative figures, followed by a strong 1per cent in the third quarter of 2012, then a quick return to negative growth. The British economy has been in and out of recession since 2008, a problem often compounded by weak quarterly figures in structural parts of the economy. At one moment in time housing could be providing small returns to growth, only for manufacturing output to be so weak that the economy once again returns to recession. But how does the UK compare?

Whilst the UK is by no means alone - with the US, Germany, and France experiencing similar yo-yoing in and out of recession - one thing is remarkable, occurring regardless of the respective government's economic philosophy. In France, we see Hollande's Socialist government operating a Keynesian strategy, whereas in Britain we see the state cutting back, limiting its size and role in the economic recovery. Yet in all these nations we see near identical economic trends; with growth being both uncertain, and over a longer period, rather insubstantial.

There may be a simple explanation for this: the weak state of the Eurozone is dragging everyone down, exports are historically low and Western nations' payment balances (excluding Germany) are running at deficits. In the most simple terms, there is no demand, and therefore, no recovery. But what if this is a more serious problem; could the growth of China and other developing economic powers, for the first time not only have a detrimental impact on the economic influence of the Western powers, but a real effect on their standards of living and economic prospects. The BRIC nations' continuous rise to economic powerhouse status could potentially have negative consequences for us here in the west.

Whilst we no longer base our economies in heavy industry, the rise of Huawei indicates the ability of the Chinese economy to move beyond being the 'workshop of the world'. As well as undermining our natural strengths in high technology industries, this may also create a potential 'brain drain' eastwards, as our brightest and best rightly chase the forefront of the global economy.

While the UK, the US, France and Germany still maintain a strong hold over industries like eco-friendly energy, high grade manufacturing and luxury cars, the BRIC economies are not far behind.

The rise of Chinese and Indian universities in the world's 500 best, combined with the ever increasing body of international students in British and American universities, clearly highlight the intentions of these nations and direction that their economies are going in.

China no longer sees itself as a workshop economy; the demands of low paid workers to reap the rewards of their booming economy is causing them to look towards a more innovative economy, one branching into areas where we in the West are traditionally strong, and ironically, potentially creating social problems here in the West in the coming years.

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