China's Growing Economic Might Is Good for UK; as Barack Obama Visits Beijing Today, Goldman Sachs' Expert on Emerging Markets Argues London -- Rather Than New York -- Is Uniquely Poised to Benefit from China's Boom; ECONOMIC ANALYSIS
Byline: Jim O'Neill
EIGHT years ago this month, I was fortuitous enough to coin the phrase "Bric", an acronym for Brazil, Russia, India and China.
It is undoubtedly the case that the C in Bric has so far been rather more important than the others. Based on two recent trips there since the start of October, one of which involved some travel around parts of that vast country, it is set to remain so.
Indeed, I continue to think that in economic terms China is probably the most important phenomenon of not only our but also our children's generation.
If we play our cards smartly, then given the time zone the UK finds itself in and the coincidence that English is the preferred language for international business including on the internet, this should be great news for us, especially London.
The statistics about China are amazing.
At the end of 2008, the US dollar value of China's GDP was about $4.3 trillion. As recently as 2001, it was around $1.3 trillion -- in other words, China's GDP has increased by about $3 trillion in just seven years.
By the end of next year, we reckon it will have risen to about $5.4 trillion, which means it will have comfortably overtaken Japan to be the world's second-largest economy.
To put just the past seven years in perspective, China has increased by the same size as the equivalent of seven 2001 Indias, or almost three 2007 Indias. In fact, China has seen its nominal GDP grow as much in that period as all the other Bric countries combined. If you bring it closer to home, its rise in that short space of time has been equivalent to creating almost two new Britains in seven years. At its current momentum, it will be growing another new UK every three or four years.
When we first suggested in 2003 that China could possibly challenge the US to be the world's number one by 2041, many thought it was a pipe dream and had virtually no chance.
In fact, it is possible a lot sooner. Indeed, we now think it could happen within 20 years -- in 2027 to be precise, so 18 years.
In order to become as big as the US, China simply needs to see its dollar value of GDP rise by 10% on average for each of the next 18 years. It doesn't need to show real GDP growth of 10%, just the dollar value rise by that. This is likely to occur with real growth of around 6%- 8% and some appreciation -- eventually -- of its currency.
What does this mean for Britain and London? First, our language, our geographic position and -- despite the regulatory shortfalls of recent years -- our legal system stand us in a position second to none. As much as Shanghai is being developed as an international financial centre and Hong Kong is enjoying yet another of its remarkable booms, London's place at the centre of the global time zone is unique. It is a huge advantage for us over New York, which is critically five hours "further back", that its working hours don't overlap with those of China.
I occasionally worry for Britain, given American ingenuity, that one day they will simply change the world's clocks and put everyone on to New York Mean Time. But until that day, it is a huge benefit for London (not quite as important, but not to be dismissed, the same is also true for Mumbai and Moscow).
I've been to China twice recently -- the second visit was a long one, with my wife. We travelled to Shanghai, on to Guilin, through the scenic Li River valley area, up north to Beijing, and spent some time walking on the Great Wall before returning to Beijing for me finally to do some work.
Shanghai is like a giant building site as it prepares itself for Expo 2010. The Bund is being rebuilt, and large swathes of cranes can still be seen all over the city. Arriving and leaving the wonderfully efficient airport, we marvelled at the machine by passport control that requested our opinion as to whether the service had been extremely good, just good, average or poor. …