Osborne visits China, but can’t escape Europe

Yet another day here in Westminster that’s all about the economy. Nick Clegg has just delivered a speech on the subject to Mansion House, focusing on ‘responsible capitalism’, which we’ll blog shortly. And two prominent forecasting groups, the Ernst & Young ITEM Club and the Centre for Economic and Business Research, have suggested that we’re effectively back in recession. They both reckon that the economy shrank in the final quarter of last year, and is wilting even further in this current quarter. But, like the OECD, they also predict that this ‘double dip’ will be relatively short-lived and relatively mild.

Against that backdrop, enter George Osborne. The Chancellor spoke from the Far East on the Today Programme earlier, and delivered seven minutes of near-unalloyed reassurance. Yes, he admitted, we’ll take a hit if the eurozone sinks, but he was quick to add that, ‘I’m confident the British Government is doing everything it can with a very difficult inheritance, facing a very difficult international situation to get Britain through this, to weather the storm.’

As for the government ‘doing everything it can’, Osborne’s main emphasis was on a greater degree of cooperation between Britain and China. He’s involved in a deal to make the City a major trading centre for the renminbi, and he stressed that British companies — from banks to IT types — should be doing all they can to service China’s maturing needs. In return, he’ll be asking China to contribute to British infrastructure projects because, well, we don’t really have the money. It’s the next part in the coalition’s ongoing drive to court major new economies like China, of course, and India.

But, still, Osborne can’t escape the old, faltering economies of Europe. When Evan Davis brought up the subject of further IMF bailouts, the Chancellor responded:

‘If the IMF believes it needs more resources — and I think it does — then … Britain has always been prepared to provide the resources in the past, and will be willing to provide resources in the future if there is a strong case.’

This is unsurprising, not least because Osborne was saying exactly the same thing last October. But it could still be controversial. It’s not just that there was much disgruntlement the last time our IMF contributions were discussed in Parliament, but also that Osborne is making a hazy distinction about where the money would go to. It can only be used to ‘support countries not currencies,’ is how he put it earlier. But if more British cash is funnelled towards, say, Athens, then a lot of people will ask ‘what’s the difference?’ — and Tory MPs among them.