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Global Economic Situation

Volume 487: debated on Thursday 12 February 2009

6. What discussions on the global economic situation he had with Chinese Ministers during the recent visit of Premier Wen Jiabao to the UK. (256287)

The talks on the economic crisis with my right hon. Friends the Prime Minister and the Chancellor addressed preparations for the London summit, avoiding protectionism, moving towards a low-carbon economy and reform of international financial institutions. Both countries aim to double UK exports to China over the next 18 months.

Given the importance of the relative slowdown of the Chinese economy, was the opportunity taken to discuss with China the scale and nature of its financial stimulus package and its likely speed of effect so that it improves the Chinese economy and, with it, that of the rest of the world?

Yes, that certainly was discussed. My hon. Friend knows China extremely well, so he will know that it recently became the world’s third largest economy. It is going to be one of the fastest growing this year, but it has been deeply affected by the crisis, and some 20 million migrant workers have returned home after losing their jobs on the east coast. I was in China last month for the G20 preparations and I discussed with officials and others in Beijing what was happening in the Chinese economy. I can say to my hon. Friend that China will be a key participant at the London summit—committed, with others, to a successful outcome, which is so important for China as it is for the rest of the world.

The Government tell us that their growth forecasts are dependent on international co-operation with China and elsewhere. They also claim that other countries are following the United Kingdom’s lead in economic policy. If that is the case, presumably the Minister will stand by the pre-Budget report’s forecasts on growth—or does he agree with most commentators, including the Governor of the Bank of England, the Secretary of State for Health and the Secretary of State for Children, Schools and Families, that the recession will be much deeper?

As the hon. Gentleman knows, we will publish updated forecasts at the time of the Budget, as normal. They will include a full assessment of developments and prospects for the United Kingdom and the global economy.

Just a couple of weeks ago, the Institute for Fiscal Studies said that

“our central forecast is that the UK will avoid deep and prolonged recession thanks to the enormous monetary and substantial fiscal stimuli already announced.”

We are taking the action that is needed domestically, which contrasts with the do nothing policies of the hon. Gentleman’s party.

The globalised neo-liberal economic model has proved to be inherently unstable, and has brought mass unemployment to China as well as elsewhere in the world. Did my right hon. Friend discuss with the Chinese the possibility of a fundamental reorganisation of the world economy, perhaps on Bretton Woods lines, and did he read Anatole Kaletsky’s article in The Times on Monday, calling for what he called a “paradigm shift” in economic arrangements?

There are lots of interesting ideas around at the moment. What I can tell my hon. Friend is that, as I indicated earlier, the reform of international financial institutions was one of the topics discussed by my right hon. Friend the Prime Minister with Premier Wen in London, and it is certainly one of the topics being considered in preparation for the London summit. I think that we shall need to see some significant changes.

What steps is the Minister taking to work closely with the Chinese businesses based here in England—both large and small—which will play an important part in ensuring that we retain the links between our two countries, not just now but in the decades ahead?

The hon. Gentleman has made an extremely good point. The United Kingdom economy benefits substantially from Chinese investment in the United Kingdom; I believe that we are the biggest recipient in the European Union. We also have the China-Britain Business Council, which does important work. The relationship is very important to us economically, and also, as Premier Wen emphasised, very important to China.