This has been a week of global economic peril, concluding with a sigh of relief that echoed around the world. The Republican Party’s zealots finally backed down: President Obama showed steel in refusing to compromise on his healthcare bill, and life in Washington returned to what passes for normal, with the risk of a US default deferred until next year.
Then yesterday came the news that China’s economy, the world economy’s most important locomotive, had recovered from two lacklustre quarters to post year-on-year growth of 7.8 per cent. George Osborne could congratulate himself on the timing of his visit: the good sense of engaging as keenly as possible with China is clear.
But these two different events throw into stark relief the relative performance of the world’s two most powerful states, and that in turn reflects the rather rapid way that global power is shifting. Mr Obama made a pivot to Asia a key theme of his presidency, in response both to the economic opportunities on that side of the world and the rapid growth in China’s economic muscle, and arguably in its geopolitical ambitions, too.
The policy was a sound one, so the fact that Washington’s bitter political stalemate obliged him to cancel planned visits to two Asian summits this month says a lot for the limits on the actual power of the man often described, erroneously enough, as the most powerful in the world.
China, meanwhile, cruises ahead, its anomalous political architecture proving so far no serious constraint on its ability to continue hauling the rest of the world out of recession. The good news from Beijing yesterday received a muted greeting from many economists: the wild years in which China’s economy grew at double figures are undoubtedly over, and China’s new leadership does not want them back. Their challenge is to keep the economy growing fast enough to maintain a strong supply of jobs and to avoid incomes stagnating, so that the domestic consumption on which future growth will inevitably depend is not choked off – but they also know that dramatic growth figures will make it much harder to ram through their plans to curb inefficient and highly polluting industries. They need just enough growth to allow the economy to become leaner and more modern, but not too much to allow the unreformed parts to grow even fatter than they are. In achieving this, they have the advantage shared by all authoritarian regimes, that all the controls are in their hands, at least notionally. And they are managing them with impressive competence. Xi Jinping’s self-congratulatory claim last week, that “China’s economy is basically doing well” and that “the slowdown…was the outcome of our own adjustment initiative,” was largely correct.
China is still growing, the US is tying itself in knots which it will struggle to untangle and geopolitical power is pivoting to the East. But this does this not mean that we should resign ourselves to a new sort of suzerainty in our dealings with the Middle Kingdom. For many centuries, foreigners awed by China’s size and venerable age performed the kow-tow. Mr Osborne found himself in this undignified posture this week, poo-poohing the idea that anyone should be nervous about doing business with Huawei, a firm frequently accused of industrial espionage, welcoming Chinese management of our nuclear power stations, and saying nothing controversial.
Eight years ago, safely in opposition, the same Mr Osborne thundered that: “Threatening free, democratic Taiwan… is unacceptable. Suppressing Tibetan autonomy is unacceptable. Persecuting religious minorities … is unacceptable.” This time we heard nothing of those themes. There must be a way to register dissatisfaction without capsizing the relationship. But Mr Osborne failed to find it.