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  • Sep 24, 2014
  • Updated: 10:57am

China steals jobs from West, says economist

PUBLISHED : Thursday, 25 November, 2010, 12:00am
UPDATED : Thursday, 25 November, 2010, 12:00am

A top British economist says China is 'stealing' Western jobs and that America is 'coming to the end of its tether' over the country's yawning trade gap with China.

Roger Bootle, the managing director of London consultancy Capital Economics, also says mainland manufacturers face financial ruin because American politicians could slap punitive tariffs on made-in-China goods.

'Emerging economies with trade surpluses, particularly China, are stealing Western jobs,' Bootle said during a wide-ranging speech in Hong Kong about how to rebalance the global economy.

With unemployment in the United States running at 9.6 per cent, populist anger would soon 'boil over', he said, adding: 'America will threaten tariffs against China as a way of trying to get China to change its policies.'

While his warnings may raise eyebrows in Beijing, Bootle is a widely respected financial forecaster. As early as 2005, he predicted the US was headed for full recession because of the nation's huge trade deficit and high government and consumer indebtedness.

US President Barack Obama has been pressing President Hu Jintao to raise the value of the yuan, which at current levels makes Western products too expensive for many mainland consumers and spurs Westerners to buy Chinese imports.

But Bootle, a special adviser to the House of Commons Treasury Select Committee and former chief economist at HSBC, said Western policymakers were missing a trick by focusing solely on the value of the yuan.

He said Beijing could help rebalance the global economy by scrapping its export-led growth model and forcing mainland companies to raise workers' wages, giving them extra spending power.

'China's trade surplus is not an economic necessity,' Bootle said. 'China depends on exports because that's the way policies are construed. What it could do is increase the wages of its workers, and organise a way in which wages are better distributed.'

Mainland citizens' incomes have risen an average 5,000 per cent since 1978, the year Deng Xiaoping began transforming the nation from a moribund, rural economy into an export powerhouse. But, adjusted for consumer price inflation, earnings have only risen ninefold in the period.

Brian Jackson, a Hong Kong-based economic strategist for RBC Capital Markets, said Beijing was not highly motivated to give mainland consumers more spending power. He said policymakers would prefer to control the economy by retaining most of the country's cash in state coffers, to be spent at planners' will on economic stimulus projects such as infrastructure upgrades.

Putting more money in consumers' pockets 'would require a real shift in mentality', Jackson said. 'It is harder to achieve the [growth] targets if you are relying on consumers to make up their own minds about whether to spend their money and what they spend it on.'

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