Financial crisis is accelerating growth of Chinese economic influence says expert

Martin Jacques, author of the book 'When China Rules The World', said that the Chinese economy is now having a bigger impact on the global economy than the US and that both US and Europe are seriously underestimating the scale and extent of China’s impact.

"The financial crisis has accelerated the relative rise of China vis a vis the US and more generally the west," said Jacques. "Arguably the Chinese economy is now a more important shaper and architect of the global economy and the process of globalisation than the US. This is an impact that is largely below our radar."

Speaking at a lecture in a series organised by Pinsent Masons, the law firm behind Out-Law.com, Jacques warned that the European Union is falling behind in trade with China when compared to countries in Asia, South America, Africa and Australia.

"This western financial crisis is deep and profound, a portent of what is to come and how the world is changing," he said. "One of the underlying causes is the decline of the developed world and the rise of the developing world. The projected year when the Chinese economy will be larger than the US economy is no longer 2027 it is now 2018."

"The Chinese economy is over half that of the US. What started as transforming China is now something else- it is transforming the world," said Jacques. "The quantity of trade that Europe has with China is very poor and speaks ill for the future of Europe. The one notable exception is Germany."

Jacques outlined the impact that Chinese economic growth is having on economies all over the world. He said that China Development Bank and the China Export-Import Bank between them lent more than $110 billion to developing countries in 2009-2010. The World Bank lent $100bn in the same period.

"China has an enormous trading imprint on the world but it's not just about trade. It's a surplus country in many different ways and has become a major financial power as a consequence," he said. "China is having an enormous impact on the 10 biggest economies in Africa in terms of its demand for commodities, its exports, infrastructure and migration."

Jacques said that economist Hu Angang has estimated that by 2030 China's share of global gross domestic product (GDP) will be 33%, with the US's share being 15% and that of the European Union being 13%.

He said that this will change the way the global economy operates.

"The remninbi will become one of the great trading currencies in a relatively short space of time. It will replace the dollar as the main global currency, it's just a question of timescale," he said.

Jacques said that the west must work harder to understand a phenomenon that is already well under way.

"We don't understand China because of the mentality that's grown up in the west that we were the first to industrialise and we thought and still think that there is only one form of modernity, our type of modernity," he said. "While we insist on looking at China through a western prism we will get China wrong. How to understand China is the big question."

Martin Jacques was speaking at Pinsent Masons Horizons lecture series