Playing with fire

In a couple of weeks’ time, David Cameron and George Osborne will arrive in China and witness at first hand an economic boom that is shaking the world. The British duo will doubtless receive a polite and outwardly respectful reception. But, as I discovered on a visit to Shanghai last week, Chinese diplomats and academics have noted the deep cuts in British spending — and they are drawing the obvious conclusions about the relative fortunes of the two nations. As one of my colleagues in China put it to me, ‘Nobody spots blood in the water faster than the Chinese.’

The contrast between the boom in China and the gloom in Britain is part of a bigger story of the shift in economic and political power from the West to the East. Two years after the global financial crisis, the United States and Europe are still in deep economic trouble, while the economic surge in Asia has resumed. That change is reflected in the announcement this week that seats and voting weights on the board of the International Monetary Fund will be adjusted, with Europe losing influence and emerging nations such as China and India gaining power. In the US, unemployment is 9.6 per cent. In China, 9.6 per cent is the annual growth figure.

The palpable change in the relative fortunes of East and West is more than an economic story. It is changing the global balance of power and the way in which the world’s most powerful countries treat each other. After a long period of co-operation, rivalries between the major powers are rising again. At the centre of this increase in international tensions is the deterioration in the relationship between the US and China — the world’s largest and second largest economies. (China officially overtook Japan to become the world’s second largest economy a couple of months ago.