I'm going to talk about something I've felt passionately interested in for a very long time. What it is that makes countries grow, turns them from poor countries to rich countries. And China has always been a sort of classic case study of how this happens. Uh I first got involved in China. I worked for Shell, the international oil company before I become an MP and I was their chief economist. And they sent me to China around about 30 years ago. And China was just emerging from a period of madness and the Mount Siong. You may remember the great cultural revolution, the chaos and before that the great famine that may have killed 20 30 million people. uh and a remarkable man took over, Dongcha Ping, who embarked on a project trying to turn China into a mixture of communism and capitalism. And it worked.
And this suddenly after centuries of stagnation, China sprung back to life. Um rapid growth, hundreds of million people lived out of poverty. Deserves to be
recognized as one of the great figures of the last century. But I was sent there to make a judgment. you know should shall invest large amounts of money in the country and they did. Uh I then went into politics and in the coalition government I was sent back to China to talk to the Chinese about British business and then since I left politics I've tried to study it more detail. I've just come back from a period in China talking to Chinese students visiting Buddhist monasteries, artists trying to get a better understanding of the country. But what has unfortunately happened is that what was seen initially as a kind of win-win collaborative relationship has turned very sour. Now this is not Jurassic Park, but it's um a picture from a hotel room in Korea last week uh where the two most powerful men in the world met to talk about a growing set of problems so-called decoupling. China and and the United States were woven together. You know, things like Apple computers, Tesla cars, two economies linked together now
uncoupling certainly after COVID. uh the chip war where America's withdrawing key technologies from China, retaliation through tariffs, uh China responding by
withholding vital rare metals, um arguments about you know cyber warfare,
um competition in the you know melting waters of the Arctic, undersea cables
which carry the world's internet, dangers of sabotage and espionage, pies. Well, we've had this in the UK and of course Taiwan, which isn't just about politics. Taiwan happens to have the factory, the so-called foundry where the most sophisticated semiconductors or chips in the world happen to be made. Now, it isn't just about China and India. I think we do need to understand what lies behind it.
Some of the trends. I'm sorry about, you know, putting a bit of maths here, but
uh the green line is very important. And it's been what's happening over the last
generation. Go back to 1919.
Uh the world's poorer countries, emerging economies, Asia, Africa, Latin America, growing from about 40% of the world economy to about 60. And the United States and Europe uh and Japan, the purple line declining. So we've had a big transformation taking place.
What's been driving this? Well, the red line which is developing Asia and under
it the black line which is mainly China but China and India together.
Now that's the past. The past might continue, might not. We, you know, China's got some economic problems, a collapsing property boom. Uh, America may have a new beast of life from the AI revolution. We see some remarkable things happening there, certainly on the stock market. But the greater likelihood is that something like this happens.
I've just taken here a kind of standard forecast from the rich man's club, the OECD, about the what the world could look like in 25 years time looking at sensible projections. And you see that China by then has an economy which is
twice as big as the United States, which is not, you know, shocking really. I mean, China has four times as many people and they're now a very sophisticated country. So, why not? What is really surprising is India, which is now following the Chinese path. Very, very rapid economic growth, catching up very fast. But the story I want to talk about is about India. Also, Indonesia, potentially the fourth biggest economy in the world. It's just overtaken the UK actually in terms of its economic size.
But I just want to talk about China andthe United States and the big confrontation which is probably the dominant fact of our lifetime actually and it's taking place on several levels but it's not just about economics. Um this is you know the future of the planet emissions of greenhouse gases and global warming and you see if you look down the middle column you know the United States like like us developed country produces more greenhouse gases per head that's our lifestyle we drive cars and so on. Uh but the biggest emissions in the world by a very long way come from China because of China's modernization.
Uh and if the issue of global warming, climate is going to be dealt with, it will be dealt with primarily by the Chinese. You know, if they cooperate or whether they don't, you know, we share the same planet. We have to work with them. And they're the biggest problem, but they also have the solution. They have the technology far more advanced than than we do. So, how is this competition between the West and China or particularly the United States and China bearing out? Well, in one key respect, the Chinese have won hands down already. They do dominate world manufacturing trade, twice as big as the United States almost. Um, and I've just come back from China. You go on these trains going at 200 miles an hour through the industrial heartland in the southeast of China.
And you're struck in the way I suppose visitors to Tinside or Manchester would
have been in the middle of the 19th century. just aruck by, you know, mile after mile after mile of factories enormous development taking place. And it's highly sophisticated. It's no longer just clothes and and toys. It's advanced manufacturing done at a higher level of competence and sophistication than anybody else in the world is now doing. So that's a battle the Chinese have won. Uh and Trump has responded by putting up tariffs. this if you want an explanation of why we have MAGA and Trump it's the previous slide you know
they lost their manufacturing the anger the frustration uh and this is the Trump
retaliation and you see tariffs steadily fell in America since the civil war with a couple of interruptions one in Trump's hero a man called McKinley who was assassinated uh and in the inter war period when American tariffs led to deepen the world depression that we all suffered from.
But since then, since Roosevelt, America opening up to the world, cutting its tariffs until Trump and the reversal of course and we don't know where it's going to lead, but it's it's a complete change of course are turning inward. But on manufacturing, the Chinese have clearly won. Technology is a bit more difficult to
call. Um there's competition with China across the whole range of modern technologies. An Australian study a few weeks ago suggested it's out of about 30
50 core technologies the Chinese probably lead on about 30 of them. but just in a quick skim on the left the chips the the microchips were the foundation of all new um airbased technology. The Americans were well ahead. Um, and they also have access to the Taiwanese foundry that makes these things. Uh, but people have been shocked by the extent to which over the last two or three years the Chinese have caught up, throw vast amounts of money at it and appear to be catching up. And the evidence for it is the second column, artificial intelligence. Again, we
assume that the big American tech companies had this pretty much uh under
control. You probably most of you use chatg.
Uh then to everybody's astonishment six months ago the Chinese produced deepseek uh which has comparable power and they did it really by workarounds. They couldn't get access to the big chips. So they they clever innovation found other ways of doing it and they've produced two or three uh advanced learning models since then. Just pick up a few of the others. green energy, wind, um solar, um Chinese well ahead in terms of technological development and stupidly the Americans have turned their back on this technology that will we will need for the rest of the century.
even nuclear power about 3/4 of the reactors in the world are now that are being built to Chinese and the other area where the Chinese are clearly ahead is telecoms. Huawei. There's a story there in relation to the UK I'll come back to. Um and some others even a field like quantum physics. I mean my I'm interested in it because my son is a quantum physicist in in Silicon Valley and 20 years ago nobody used to bother to read Chinese articles on this subject. It was so backward and now they're roughly on a par. And we see this right across the board. But but so far, you know, technologically, you've
got a 50/50 head-to-head competition.
There's one respect in which the
Americans are very clearly ahead. They
have a a dominant currency. People, you
know, use dollars. Business uses
dollars. It's safe, convenient, we trust
it until Trump. Um but gradually over
the years, this is even before Trump, um
countries gradually shifting away from
the use of the dollar in transactions. A
lot of some of them were scared when
they saw the use of uh sanctions against
Russia which gave because the Americans
had a chokeold over the currency system.
uh and so there is a process which is
now accelerating and moving away from
the one area where the United States has
an undoubted lead on on on the Chinese
which is control of the world currency
and its reserves. So where is all this
going to lead? Um don't be too baffled
by this but this is a a technique I
developed with my colleagues when I was
in Shell to try and think about the
future. How do you think about the
future 25 years ahead? There's no point
trying to predict. There's so many
uncertain things happening. So the best
way to do it is to tell stories which
are logical, coherent. Um they may or
may not be true, but they they have they
give us a a picture that we can try and
keep in our minds and think about and
challenge. And one of them is that after
this uh tech war, the decoupling, the
Ukraine war that's been taking place,
the world falls into the pattern which
Biden was beginning to develop of trying
to create a global alliance against the
Chinese, which was Europe and the United
States with India, crucially India, as a
security ally. That's the so-called
quad. it is an alliance, Japan, the
United States, uh uh Japan and
Australia. Uh and that's possible. Um
but if if it what ever was a story, uh
Trump has put a big boot on it by
turning on his own allies and the very
capricious approach to trade, it it may
anyway overestimate the power of the
West as as I showed earlier is declining
economically. So you've got another
story which is coming out of the
so-called bricks group which is this
powerful countries from the so-called
global south not just China uh but
Brazil, South Africa, Nigeria, Saudi
Arabia and others uh in which the world
becomes kind of multipolar. You no
longer have just one superpower. You
have America in the Americas, Russia in
Eastern Europe, uh Saudi Arabia in the
Gulf, China in East Asia. Uh and that's
a sort of plausible way that the world
could evolve, but it's also a very
dangerous one because nobody's
responsible then for the big things we
all share in common. You know, climate,
fighting pandemics, dealing with
economic catastrophes like we had in
2008.
And so that leads to another story which
Trump is sort of pushing along which is
that international institutions decay.
you know, the World Trade Organization
no longer functions. Uh the COP on
climate, America isn't going to attend
and you do get a vortex. Nobody's in
charge. You know, the world's systems
gradually fall apart and that could well
lead to disaster and out of disaster the
system could be reborn. I like to have
an optimistic end to all of this, but
you know, these are different ways that
the future can evolve. So let me just
conclude with a few takeaways for you.
Um why should you care about all this?
Does it matter? Well, it it does because
we as a country often as individuals are
now being asked to choose. When I was in
government a big choice, do we use
Huawei in the telecommunication system?
The Americans said, "You have to rip it
out otherwise we will no longer supply
you with key technologies." And the
British government complied. uh we have
a less efficient telecommunication
system as a result. Universities are
being told Chinese students it's a
problem you know security uh you read
about the spy scandal British government
must decide the Chinese friends are
enemies it's more complicated but we're
being put in a position where we have to
choose dangerous
there are opportunities just leave you
with that thought a lot of business
opportunities working with companies uh
green companies when I went back to
China a few weeks ago I went into this
enormous refueling center in Shenzen, my
old company Shell and its logo. But it
wasn't above petrol pumps. It was above
200 charging points because China's cars
are now almost overwhelmingly electric.
So green business services,
universities, financial services, there
are opportunities, not just threats. And
even if we decide to bypass the Chinese,
there are other countries coming up very
fast that we will have to confront. Do
we regard them as friends or enemies,
competition, threat? Uh India probably
the next next in line to be a global
superpower.
So what do we do? How should we think
about all this? And I have one, you
know, simple message. You know, Britain
has some great strengths. We many ways
still a great country and it comes from
openness to trade, investment, big
ideas, people. Uh and if we lose that
and we try to hide from the Chinese and
the rest of the world, that's not a good
outcome. But thank you for listening.
