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| Labour's Tom Watson attacks Tory minister over 'bullish on China' article | Labour's Tom Watson attacks Tory minister over 'bullish on China' article |
| (34 minutes later) | |
| A Treasury minister who is one of George Osborne’s closest advisers has been criticised by a Labour MP for dismissing fears that the Chinese stock market was “dangerously overvalued”. | A Treasury minister who is one of George Osborne’s closest advisers has been criticised by a Labour MP for dismissing fears that the Chinese stock market was “dangerously overvalued”. |
| Jim O’Neill, the minister for infrastructure and retired chairman of Goldman Sachs Asset Management, wrote in January that the Chinese economy would rebalance itself and said “eternal bears” who feared for the country’s fiscal stability were wrong. | Jim O’Neill, the minister for infrastructure and retired chairman of Goldman Sachs Asset Management, wrote in January that the Chinese economy would rebalance itself and said “eternal bears” who feared for the country’s fiscal stability were wrong. |
| On Monday European stocks tumbled and the US Dow Jones index plunged 1,000 points within minutes of opening after Chinese shares had their worst day since 2007, intensifying a stock market rout driven by fears about the world’s second-biggest economy. | On Monday European stocks tumbled and the US Dow Jones index plunged 1,000 points within minutes of opening after Chinese shares had their worst day since 2007, intensifying a stock market rout driven by fears about the world’s second-biggest economy. |
| Related: US markets join global selloff after China panic - live updates | Related: US markets join global selloff after China panic - live updates |
| Tom Watson, the favourite to become Labour’s deputy leader, said Osborne should explain why Lord O’Neill should be the minister in charge of infrastructure projects including the Northern Powerhouse. | Tom Watson, the favourite to become Labour’s deputy leader, said Osborne should explain why Lord O’Neill should be the minister in charge of infrastructure projects including the Northern Powerhouse. |
| “In January, Jim O’Neill, one of [Osborne’s] closest economic advisers, the man he installed in the House of Lords and put in charge of the nation’s infrastructure, dismissed the ‘eternal bears’ who said the Chinese stock market was dangerously overvalued and being propped up by artificial means,” he said. | “In January, Jim O’Neill, one of [Osborne’s] closest economic advisers, the man he installed in the House of Lords and put in charge of the nation’s infrastructure, dismissed the ‘eternal bears’ who said the Chinese stock market was dangerously overvalued and being propped up by artificial means,” he said. |
| “He heralded the strength of the Shanghai Composite Index and said he remained ‘bullish on China’. The Shanghai Composite Index has fallen by nearly 30% since June, with potentially serious ramifications for the global economy.” | “He heralded the strength of the Shanghai Composite Index and said he remained ‘bullish on China’. The Shanghai Composite Index has fallen by nearly 30% since June, with potentially serious ramifications for the global economy.” |
| Watson, the MP for West Bromwich East, also raised questions about the stability of major projects that Chinese corporations were looking to invest in, including nuclear power stations and railways. | |
| “The UK is dependent on China for £100bn of infrastructure investment over the next decade. George Osborne has appointed O’Neill as his commercial secretary with responsibility for the so-called Northern Powerhouse, for Britain’s industrial strategy, and for attracting overseas investment in UK infrastructure. | |
| “The chancellor should tell us why he thinks a minister who has got it so badly wrong on China has been placed in charge of so much else the country needs to get right.” | “The chancellor should tell us why he thinks a minister who has got it so badly wrong on China has been placed in charge of so much else the country needs to get right.” |
| O’Neill was given a peerage and a top job in the Treasury in May, when he took over as minister of infrastructure from the former Locog chief executive Paul Deighton. | O’Neill was given a peerage and a top job in the Treasury in May, when he took over as minister of infrastructure from the former Locog chief executive Paul Deighton. |
| In January O’Neill wrote in the Business Standard: “Many international commentators remain bearish about China, expecting real GDP growth to slip significantly below 7%. The reasons cited usually involve some combination of excessive debt, inefficient lending, weaker export markets and consumers’ ongoing inability to play a bigger role in the economy. | In January O’Neill wrote in the Business Standard: “Many international commentators remain bearish about China, expecting real GDP growth to slip significantly below 7%. The reasons cited usually involve some combination of excessive debt, inefficient lending, weaker export markets and consumers’ ongoing inability to play a bigger role in the economy. |
| “I can think of at least three basic reasons to be bullish on China. First, the collapse of crude oil prices will boost consumers’ real incomes, helping them play a larger role in the economy. Second, even though property prices have recently stalled and begun to fall, China will probably avoid a serious credit crunch, partly because Chinese policymakers have been more serious about restraining prices. A third reason to be optimistic is the subdued nature of inflation in China.” | “I can think of at least three basic reasons to be bullish on China. First, the collapse of crude oil prices will boost consumers’ real incomes, helping them play a larger role in the economy. Second, even though property prices have recently stalled and begun to fall, China will probably avoid a serious credit crunch, partly because Chinese policymakers have been more serious about restraining prices. A third reason to be optimistic is the subdued nature of inflation in China.” |
| He went on: “Taken together, these factors will make it easier for China to rebalance its economy – by raising wages, increasing property ownership rights for urban migrants and reforming pension systems. In 2016, when China – with its economy growing at 6 to 7% – chairs the Group of 20 nations, it can do so as a fully engaged member of the global economy.” | He went on: “Taken together, these factors will make it easier for China to rebalance its economy – by raising wages, increasing property ownership rights for urban migrants and reforming pension systems. In 2016, when China – with its economy growing at 6 to 7% – chairs the Group of 20 nations, it can do so as a fully engaged member of the global economy.” |
| Perhaps best known for coining the acronym Bric to describe the emerging markets of Brazil, Russia, India and China, O’Neill spent 15 years at Goldman. He stepped down as chairman of the bank’s asset management business this year. | Perhaps best known for coining the acronym Bric to describe the emerging markets of Brazil, Russia, India and China, O’Neill spent 15 years at Goldman. He stepped down as chairman of the bank’s asset management business this year. |
| A spokesman for the Treasury had not responded to a request for a comment at the time of publication. | A spokesman for the Treasury had not responded to a request for a comment at the time of publication. |
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