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Monday, December 18, 2017

POINTS OF VIEW - Leading UK analyst focuses on China

Professor Tim Congdon of Lombard Street Research Ltd, gave a presentation entitled “The Asian Free Trade Boom: what does it mean for the world economy? And for shipping?” at a lunch this week organised by the International Maritime Industries Forum (IMIF).

Focusing on the Chinese economy, Prof. Congdon explained that significant growth in Chinese exports and imports is nothing new – they have been growing steadily for about 20 years. However as China’s demand for energy and commodities overtook its domestic production, this fuelled an exceptional period for various shipping markets which has been seen over the last few years - especially since China joined the WTO in 2001.

From a demographic point of view, the situation in China can also be compared to that of Western Europe in the 1950s and 1960s, with a massive movement of population from rural to urban areas coupled with large investments in infrastructure, housing, industry and growth in retail consumption.

Prof. Congdon highlighted that China’s growth has had a positive effect on the world economy, in great part due to low import and export tariffs of around 10% - equivalent to tariff levels found among the country’s main trading partners in Western economies.

The same has not been true for India, the world’s other huge developing country, said Prof. Congdon, where high tariffs have hampered trade development. However, hopes are that this will change as India’s prime minister-designate, Manmohan Singh, prepares to form a new government. Singh has been hailed by many as architect of much of India’s economic reform process and has pledged to promote an investor-friendly climate.

Although increased demand from the Asian economies will have a certain inflationary effect on other economies, in essence an “Asian Free Trade Boom” would continue to feed a recovery in the world economy and global trade – and continued strength in the demand for shipping services. Prof. Congdon expects the growth cycle to continue for some time, albeit at a slower rate in 2005 and 2006.

Prof. Congdon is one of Britain’s leading analysts and the founder of Lombard Street Research Ltd. He is a visiting professor at CityUniversityBusinessSchool and has written a number of books on monetary policy.