Dealing With Problems of Chinese Economy

Readers Question: How should we respond to the Economic impact of China’s Rapid economic expansion.

Firstly, I am not convinced that China’s economic growth is a problem for the UK. I would argue China’s economic development has many benefits. (see: how Chinese economy has affected UK Economy)

Some Issues of China’s Growth and How To Respond to Them

Rising Oil Prices. We can’t blame just China for rising oil prices. But, it is a factor. There is not much UK government can do about that. Higher oil prices increase the incentive to reduce consumption of oil and also develop alternatives. See: Dealing with higher oil prices.

Decline In Manufacturing Sector. The growth in Chinese manufactured goods industry has led to a relative decline in UK manufacturing. The government can always try to implement better supply side policies to improve productivity of industry, but, there is a limit to how much they can do. Governments may need to just accept the changing structure of the economy. We might be better focusing on the potential of service sector industries, such as education.

Environmental Problems. A problem of Chinese growth is the increase in carbon emissions. Growth from China can easily dwarf any savings the UK make in global emissions. This raises the importance of creating global agreements to limit environmental pollution.

Current Account deficit. I would say that blaming China for current account deficit misses the point. Most of the deficit is caused by a decade of high consumption and low savings. Since the credit crunch, the UK pound has devalued dealing with some of the deficit.