I sometimes hear people say but the Chinese never said what they intended to do. But it is just that we did not hear what they said. Partly that is because their forward announcements are often in speeches where the form of introductions loses our attention before they get to the point.
Chinese tend to lay the background much more than we do. So we miss the point.
Attached is an important speech by the Minister of Foreign Affairs－ Keynote Speech by Foreign Minister Wang Yi. We would expect such a speech to come from the Commercial sections of Government. In China matters relating to relations overseas come under the Ministry of Foreign Affairs first and then other Ministries become involved. That was the decision of President Xi when he announced China’s new Foreign Policy two years ago.
It means that the Ministry of Foreign Affairs makes the key policy announcements and supervises them because, presumably, they are testing policy ideas against the global environment for their relevance and appropriateness.
Many countries have striven to find the balance between the Commercial Ministries and Foreign Affairs Ministries – for China we need to look and listen to the Ministry of Foreign Affairs for major policy announcements.
Here we have a major announcement of China moving industrial capacity out of China to developing countries. Why is it significant? In the beginning of the last decade many commentators talked about the dependency of China on the USA and European market. They accounted for almost 60pc of China’s exports. We cautioned against that and said China would continue to export to developed markets but would move its focus to developing markets.
In just over 10 years China’s exports to the USA and Europe account for 33 percent of China’s exports – a big shift and a big change away from dependency on the Western markets.
This speech announces that China’s spare capacity in its industry will be increasingly shared with developing countries to help them industrialise. This will impact developing countries long stuck in raw material exports and imports of finished goods. It will change the balance of the terms of trade of the world.
It is as if the UK had moved its surplus industrial capacity in the 19980 and 1990’s to developing countries and provided them with the finance and trained managers to do that.
The UK and many other developed countries just gave up industrial production after the move to financial services of the mid 19880’s led by Reagan and Thatcher.
China is not moving out of production and industrial manufacturing. It is staying in that field in China and moving more upmarket to higher and newer technologies and exporting its current technologies to developing countries.
It will make a huge difference to world manufacturing and the balance of trade globally. It will take 10-15 years but it is going to be a major impact.
How the west can respond to this? Not easy because we have closed and written off most of our older industrial capacities and lost the engineering and management skills to make them work. We do not have the financial structures to support investment overseas, probably not to support industrial investment in our own nations.
China is NOT closing industrial production in China and simply enabling it to move overseas. China will continue to open its industrial capacity to foreign investment and partnership. For those involved in industrial manufacturing from raw materials through to final products China will increasingly become the world’s centre and also the supplier of existing levels of technology to developed nations.
A huge change in world markets is starting just as the Silk Roads and China’s emergence as a global nation has impacted the world in the last 15 years.
The balance of economic and commercial power and trade between North and South is going to change forever.
As BRICS and SCO meet this week, following the official formation of the AIIB last week, we are seeing the emergence of a huge new financial and commercial set of initiatives in Central Asia , Africa and South America. AIIB will be closely followed by the new BRICS Bank and then a new SCO Bank. These will, collectively outsize the IMF and the World Bank.
They do not intend that they challenge the IMF and the World Bank , but that may change in 20 years or so.
These new world banks will focus on the developing world and opening new markets.
As Europe focuses on how to extricate Greece from the false debts created by poor lending and a corrupted state in Greece, China and the BRIC and SCO nations will be focused this week on developing nations and new markets.
Europe is at the other end of the Silk Roads and a key partner for these new global forces. We can stimulate our economies by working with these new emerging forces to create a new continent of Eurasia, and with London as a key global financial centre helping glue all this together.
The enlightened world leaders will quickly solve the Greece’s of the world and move to the new agendas. They will move away from regional conflicts and focus on growing their own and other economies.
This is a time for change and it is happening in front of our eyes. Of course it could all go wrong and the economics fail or tensions take the front line. But China has been thinking and working on all this for more than two decades. This is not the policy of reaction to events. This is well worked out policies designed to help China achieve its target for 2049 in a world that is interdependent and where the benefits of development are shared and not kept to one or two nations.
A new form of global trade and investment is unfolding but in new areas of the world.