At the risk of sounding like Neville Chamberlain, how bizarre that we should be panic-selling our stock-market investments in reaction to the news of a slight economic slowdown in a faraway country to which we export little and whose direct investments in our own economy created fewer than 5,000 new jobs last year.
Throughout the mini-crash of 2016, it has become received wisdom that a Chinese slowdown is threatening the global economy, spreading contagion to every corner of the globe. The fear manifested itself in a 3.5 per cent drop in the FTSE 100 on Wednesday 20 January, a day when a flurry of good-news stories about the British economy, with rising car production and falling unemployment, was overlooked by investors, who instead fretted about the news that the Chinese economy had slowed slightly, from 7.3 per cent growth in 2014 to 6.9 per cent last year.
According to the pessimistic narrative, China is the engine of global growth. If it falters, the rest of the world economy falls. And if the slowdown doesn’t look too bad on paper, empty shopping centres, closed factories and unsold flats tell a different story. China has failed to make the transition from an export-led economy to a consumer-led economy. Without making that transition, the Chinese economy is doomed. And thanks to globalisation, that means we are all doomed.
This narrative is hard to square with the facts. To deal with them in reverse order, the assertion that the health of the UK economy is somehow inextricably linked with the wellbeing of China’s is bunk. China has been a fast-growing market for UK exports, yet in November it still accounted for only £1.5 billion of the £25.3 billion of goods and services exported by UK firms. Moreover, our exports to China are still growing, in spite of the slowdown there: they grew by 0.6
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