One difference between the rivalry with China and the cold war is that the Soviet Union was completely economically segregated from the western world. That is not the case with China nowadays: cheap goods have flooded western markets for decades. But are we heading back to the multipolar world of the 20th century?
China and the West are out of step in terms of monetary policy. China’s central bank actually moved to reduce interest rates this morning, after stronger-than-expected data on wages. A short-term lending rate was cut from 2 per cent to 1.9 percent.
How come? Because inflation in China is beginning to go into reverse as its economy sags. China’s Consumer Price Index (CPI) is running at just 0.2 per cent. Producer prices – raw materials which determine a large part of the cost of manufacturing goods – are stumbling, falling by 4.6 per cent in May.
A large part of this is down to weakness in the Chinese economy.
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