WS MoreOrLess: Numbers of the Year part 3.
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What is the main topic discussed in this episode?
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Welcome to the first more or less of 2015 on the BBC World Service. I'm Tim Harford. We always think that the start of a new year is the perfect time to reflect on the year that just went by. And that's what we're doing today with the final instalment of our Numbers of the Year, where we look at the most interesting and important numbers from 2014. One place where the new year doesn't begin on January 1st, of course, is China. And it's the subject of our first number from Robert Peston, the BBC's economics editor.
Well, the number that I've been obsessed with for, you know, actually decades now has been the rate of China's growth. For 30 years, it grew at a sort of mind-boggling rate, 10% a year.
Which means that the country is, the economy is doubling in size roughly every seven years. That's right.
But that all stopped when the global economy hit the skids in 2008. And actually, it fell very sharply. And then the Chinese government did something remarkable, which is it persuaded its banks to lend as if there was no tomorrow. And they lent for investment and investment in China went up from an already amazingly high 40 odd percent of GDP to about 50 percent of GDP. And the growth rate picked up again. So half of all the money in China is being spent on investment goods rather than consumption. Unbelievable. I mean, you know, there's been nothing like it in the history of capitalism, basically. I mean, it's astonishing. And finance by debt. The Chinese have worked out that this new way of growing through debt funded investment rather than exports can't go on forever, that it's actually potentially quite dangerous.
And so they're trying to reconstruct the economy, but it's not going desperately well.
What is the episode's focus on 'Numbers of the Year' and who hosts it?
Right.
And actually, they're still too dependent on investment. So basically, growth has come down. It's come down to just under 7.5% now. I'm not sure we can trust these numbers, to be honest. One of the things I was going to preface all this by saying is my world number is sort of actually quite difficult to pin down because I think most of us would say if we're slightly uneasy about most government statistics, we're profoundly uneasy about China's statistics. But we do know that China is slowing down. And there's a big debate about how fast it's slowing down. There's a big debate about how fast it should be slowing down. But what I would simply say is this. The big story that has influenced all our lives over the last 30 years has been the economic revolution in China.
I mean, it's just changed everything. For years, it improved our living standards by making the stuff we buy cheaper and cheaper and cheaper. It gulled... central banks everywhere into thinking they had inflation under control, so they kept interest rates way too low for too long. China generated these enormous surpluses, which they then lent to America to finance its colossal deficit. China was the big economic force in the world, and it still is the big economic force in the world, but it's moving in the opposite direction. And depending on the speed at which it slows down and the way that it slows down... that will have an influence on the precise pace at which it influences all our lives. But we should be under no illusion that the really big thing in the world which will have an impact on our living standards is what happens in China.
Nothing else really matters in comparison.
So that's the number, not just of the year, but of the next decade. And we don't even really know what it's been for the last decade.
We don't really know what the precise number has been. But the point is that we can see what's happening in China on the ground. We've seen what it's done to the prices of things that really matter to us, everything from food to energy.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–2:22
2
What is the episode's focus on 'Numbers of the Year' and who hosts it?
2:22–5:05
3
Why is China's growth rate Robert Peston's most important number?
5:05–8:18
4
How did China's post‑2008 debt‑fuelled investment change its growth pattern?
8:18–9:39