Scholz must get real on China
Wolfgang Munchau
New Statesman
German chancellor Olaf Scholz is “clearly not happy with Brussels”, says Wolfgang Munchau. During a recent visit to China, he warned the EU not to impose tariffs on Chinese electric cars; in Brussels he criticised the EU for failing to conclude free-trade deals. His traditional corporatist view ignores geopolitical tension. But firms that simply trust their governments to protect them from geopolitics are “far more likely” to expose themselves to risks. China accounts for almost 40% of Mercedes-Benz’s sales; BASF is “betting the house” on China. “This is Germany’s subprime mortgage crisis.” Ultimately, Scholz’s “softness” on China will fail due to a “lack of allies” (China-EU and -US relations are cooling). But “geopolitical hardliners” should beware of being contemptuous of economic reasoning. The “dismantling of globalisation” and creation of “adversarial trading blocs” will cost “tens of trillions of dollars” in lost productivity and investment and lead to greater inequality and a weakening of democracy itself. Unless the geopolitical approach is accompanied by a focus on investment and innovation, the risk is of losing both the commercial and geopolitical wars. Scholz may not have thought this through, but “neither have other leaders”.
Britain’s talent exodus
Jeremy Warner
The Telegraph
London remains the top choice for global professionals, according to Boston Consulting Group’s research, and Microsoft has just invested a hefty £2.5bn in Britain. Yet if this proves that Brexit hasn’t yet sparked a “mass exodus”, anecdotally a different picture unfolds, with a “steady stream of departures” to the Middle East, US and Europe, says Jeremy Warner. “Once-abundant liquidity” has been draining from “low-growth Britain” and a “culture of risk aversion” has spread through the tax and regulatory system, “poisoning” our position as a “magnet for international capital, talent and wealth”. This is the legacy of the 2008 financial crisis, which also led to rising taxes to repair public finances. Our economy is “more than 20% smaller than it would have been had its pre-crisis growth trajectory been maintained”. There is no reason the City shouldn’t thrive outside the EU, but it will “wither and die if denied access to alternative pools of international capital as compensation for loss of its European markets”. At present, these are heading to Dubai, New York and the Far E
