GT Voice: Reviving trade should be part of Truss’ plan to grow UK economy
Published: Sep 07, 2022 10:20 PM
Illustration: Liu Rui/GT

Illustration: Liu Rui/GT

The unexpected decline in China-UK trade should raise the alarm for the UK economy. Over the first eight months of 2022, the total value of exports and imports between China and UK was $69.5 billion, a decline of 2.5 percent on a yearly basis, and 12 percentage points lower than China's overall trade growth during the period, data released by the General Administration of Customs showed on Wednesday.

The 2.5-percent decline was in sharp contrast to the growth rate of 21.9 percent for the same period in 2021. 

This year's unexpected drop in trade with China is the result of multiple reasons such as a gloomy global economic outlook. Besides, the cost-of-living crisis has whittled away the purchasing power of many UK consumers, especially those with relatively low income.

As the new prime minister of UK, Liz Truss inherits an economy in crisis, with inflation at a 40-year high. In her first speech as prime minister, Truss was quoted as saying that she will help the nation "ride out the storm" with a "bold plan" for the economy. 

Truss has repeatedly stressed her focus on delivering tax cuts to accelerate the sputtering economy, but not all economists hold optimistic views about Truss' plan.

Some analysts said that Truss has tried to make herself a "political heir to Margaret Thatcher," Britain's formidable cheerleader for free market and low taxes, but if Truss' tax cut plans mean higher borrowing or lower public spending, or both, it will likely bring more uncertainties to UK's dimming economy.

There won't be any shortcuts for UK policymakers to tackle the nation's looming economic crisis. At a time when high inflation reduces consumers' incomes in real terms and therefore hinders the growth of UK's overall consumption, the nation's future prosperity lies, in part, in exports.

However, Brexit is having serious negative impact on trade, forcing UK to strengthen its trade ties with countries outside Europe. In 2021, China replaced Germany as UK's largest single import market for the first time on record, as UK's trade in goods with EU members plunged because of Brexit and the COVID-19 pandemic. 

Over the past 10 years, British export to China grew four times faster than its export to other countries, according to data from the Chinese embassy in the UK. The economies of China and the UK are highly complementary. China has stable and consistent policies and plans, a huge market, as well as strong innovation and manufacturing capabilities. 

Zheng Zeguang, Chinese Ambassador to UK, said in March that China will continue to be a strong powerhouse for the economic recovery and prosperity in many economies in the world, including UK.

Efforts to reverse the decline in trade growth with China should be a part of the new prime minister's plan to grow UK's economy. On the one hand, a gloomy outlook for the UK economy highlights the necessity to boost UK exports and unlock opportunities for UK companies, and, on the other hand, imports of inexpensive Chinese products can help tackle elevated inflation and the cost of living crisis.

It is regrettable to see Truss in the past months of political campaign indicate she may take a tough stance on China. Some experts are concerned that the new prime minister will bring uncertainty to future policymaking and China-UK relations will also be impacted. 

Chinese Foreign Ministry spokesperson Mao Ning said on Tuesday in Beijing that sound bilateral ties "serves the common interests of both our peoples," and "we hope UK will work with China in the same direction so that our relations will move along the right track."