July 26, 2007 | posted by Michael Baxter in IABN |

Who said economics was a gloomy science?

The IMF has just released its latest forecast for the global economy, and it has upped its forecast for global growth. It now thinks the world’s economy will expand by 5.2 per cent this year and next, whereas it previously estimated growth of 4.9 per cent.

It now expects China to expand by 11.2 per cent this year, from 10 per cent originally estimated.

In fact, the IMF expects China to be the biggest single contributor to global growth, and China, India and Russia are expected to account for no less than half of all global growth this year.

And yet, in the US, politicians still clamber over each other to criticise China.

They say it subsidises industry, fails to offer adequate copyright protection and artificially keeps its currency too high in value. In fact they criticise China for adopting many of the policies that the US itself adopted when it was a developing economy in the 19th century.

The biggest threat to continued economic growth might well come from the land of the free, where paranoia over China threatens to hinder international trade and, via the potential appreciation of the yuan, create a massive increase in prices across the world.

Don’t forget there is a multiplier effect from growth. China’s expansion has helped other economies expand too. Without China the rate of interest would have been much higher, and global growth may not have been positive at all.

In seeking to pull the drawbridge up, and stop China from enjoying the kind of riches appreciated in the US, the US may condemn the world to an unnecessary economic slowdown.