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World economic center shifting rapidly eastward: economist

(Xinhua)
Updated: 2010-02-05 17:39

MOSCOW: The center of the world economy "is shifting eastwards quite quickly," said the director of the London School of Economics and Political Science.

"Undoubtedly the center of gravity of the world economy is shifting eastwards quite quickly, with the rapid growth of China and India in particular, and the financial crisis has accentuated that trend, because the Western economies have been worse hit than has China," Howard Davies told Xinhua during an interview at the Russian Forum 2010.

Davies said that if one looks at financial markets, the big trend has been the development of large surpluses in China that then have had to be reinvested in western countries.

"So, it's the Chinese trade surplus and the huge increase in their holdings of Western assets that's really the decisive element in world financial markets today," Davies said.

Davies also said that the global economy is no longer the same as in the past when the Group of Eight (G-8) was supposed to be discussing economic development.

The expansion of the G-8 to include China, India, Brazil and other emerging countries to form the Group of Twenty (G20) "is a positive improvement," he said, because those countries "now form a hugely important part of the world economy."

Meanwhile, Davies warned that the current recovery is "quite fragile because it is somewhat artificial."

Practically every country in the world currently has very loose monetary and fiscal policies, Davies said.

It remains unknown, he said, "whether the recovery is yet robust enough to survive on its own, in other words, to survive without fiscal support from governments."

"I think even in China, the huge government fiscal stimulus package introduced at the end of 2008 undoubtedly has had a big effect on China. And I think without that we would not see the Chinese economy growing at 10 or 11 percent," he said.