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The return of David Cameron to British politics and today’s meeting between Xi Jinping and Joe Biden could herald an era of improved trade relations
- Chinese President Xi Jinping will meet US President Joe Biden today, in San Francisco, and on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.
- The meeting will occur just a day after the latest US inflation data is released and shortly after the release of UK inflation data.
- A healthy supply chain needs China; Chinese and Western trading relationships, the long-term inflation rate and sustainable interest rates are all linked.
- The return of David Cameron to mainstream politics may support an improved Western-Chinese relationship.
- Oliver Chapman, CEO of the United Kingdom’s No.1 fastest growing company and Europe’s No. 3 fastest growing in 20221—comments.
LONDON (November 14, 2023) — Ahead of today’s meeting between Joe Biden and Xi Jinping, Oliver Chapman, CEO of supply chain specialists OCI, remarks on the need for a thawing of US-Chinese relations.
“Inflation is falling in the West, but in China, inflation is negative. Recent falls in US, UK and eurozone inflation were baked in many months ago. Indeed, when British Prime Minister Rishi Sunak vowed to half UK inflation, he was simply promising to deliver something that would happen without intervention. “In the US, inflation was probably around three per cent last month and five per cent in the UK. (As data out this week is likely to confirm.) The real challenge facing central banks and policymakers, in general, is the last mile in delivering an inflation rate close to two per cent, which has long been their target. In the 2010s, achieving inflation close to two per cent was relatively easy. Interest rates were ultra-low because inflation was low. The natural interest rate, or sustainable interest rate, was close to zero. “In 2023 and the years ahead, there are reasons to think the sustainable interest rate will be higher. A consequence of higher interest rates will be slower growth and less disposable income for highly indebted households after the cost of servicing debts. “Whilst central banks can play a key role in tackling inflation in the short and medium term, the sustainable or natural interest rate is caused by factors largely beyond their control. “For the first two decades of this century, the rise of China and favourable demographics—maybe creating a global savings glut—helped create an environment of weak inflation and thus lowered interest rates. “For the next few decades, demographic changes will exert a major inflationary threat. But a reversal in globalisation will also lead to less efficient global production and thus create inflationary pressure. Technologies such as AI will help counteract the negative forces.
“It is vital that trading relationships between China and Western nations improve. “Supply chains must be robust — this has become an obvious lesson of the Ukrainian crisis when frailties in the supply chain were exposed. A robust supply chain is not overly reliant on any supplier or region. And it is likely that supply chains have become too reliant on China. “But supply chains cannot exclude China. Whilst India and other countries in Eastern Asia, Eastern Europe and Mexico are emerging as alternatives, China remains a critical actor in the global economy. If relationships between Western nations and China continue to deteriorate, then negative outcomes should be expected for supply chains. This, in turn, would negatively impact the fight against rising inflation and the struggle to return long-term interest rates to far lower levels. “It is interesting to note that the new British Foreign Secretary was once a strong advocate of Sino-British harmony — David Cameron and Xi Jingling appeared to have a good relationship. “OCI hopes that the meeting between Mr Xi and Mr Biden—as well as Mr Cameron’s return to mainstream politics—will herald an era of improved relationships between the West and China. Supply chains need these relationships to work, as does the Western economy.”
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