China, India, and the Future of Global Trade – An Interview with Richard Herd

Written by: Clara CASTELLANO

Clara Castellano and Richard Herd – Credits: ILYMUN Press

In a world increasingly defined by economic shifts, political tensions, and global conflicts, the theme of "Democracy and Security in a World of Conflict" has never been more relevant. To gain a deeper understanding of how these forces intersect and shape international relations, we sat down with a distinguished economist whose career has been dedicated to analyzing the economies of some of the world’s most influential nations, including China and India. Richard Herd’s extensive expertise spans key roles at institutions like the Bank of England, the Foreign Office, and the Organization for Economic Co-operation and Development (OECD), where he provided economic analysis and policy recommendations that have influenced global discussions. His career journey – from studying mathematics to specializing in economics – has led him to a unique perspective on the rising power of emerging economies and the economic and political tensions that come with them. In this interview, we delve into his experiences working with governments, examining the economic trajectories of China and India, and exploring how economic strategies can contribute to global peace amid conflict. 

Clara: Thank you for joining us today. Let’s start with your academic background. What led you to study Liberal Arts and Economics at Cambridge?

Richard Herd: Well, initially, I studied mathematics in the UK and went to Cambridge to continue with it. However, I found the subject too abstract and wanted something that felt more connected to the real world. Economics seemed much closer to the practical world than pure mathematics, so I switched from studying maths to economics.

Clara: So, you were looking to be more involved in the political and practical aspects?

Richard Herd: Exactly. I wanted something that was connected to the world, not just abstract theories. Interestingly, economics has become increasingly mathematical over the years, which wasn't what I had anticipated when I made the switch.

Clara: Was that one of the reasons you decided to specialize in macroeconomics?

Richard Herd: Yes, that’s correct. When I worked at the Bank of England, I focused on labor markets. Later, when I moved to the Foreign Office, I provided general economic analysis to help diplomats in their work.

Clara: What were your objectives when you moved to France and worked at the OECD?

Richard Herd: I was looking for more responsibility and better rewards for the work I was doing. I initially expected my role to be similar to what I did at the Bank of England and the Foreign Office – writing papers behind a desk. But it eventually involved more, like traveling to other countries, meeting government officials, and understanding their views on different policies. It was incredibly rewarding and gave me the opportunity to see the world.

Clara: On the OECD website, it mentions that the organization works closely with citizens. Was that your experience?

Richard Herd: Not in the unit I was part of, which consisted of about 200 people. We worked mainly with other governments and their economic units. However, some parts of the OECD, like those working on education, have had a significant impact on citizens. For example, their reports on school performance are frequently cited by the public. While our work impacted people's welfare, it wasn't a direct interaction with citizens.

Clara: Why did you choose to specialize in the Indian and Chinese economies?

Richard Herd: I was already working in Japan, which led me to work in Korea. Then the Chinese government began reaching out to our organization, and senior management asked if I would focus on China, which I agreed to as I found the dynamism of Asian economies to be a welcome change to Europe. In addition, the experience of the work with the Korean government bringing it into the OECD had been rewarding. I thought China would be interesting especially as it was an under researched area two decades ago. As for India, after publishing a report on China, the Indian government contacted us and asked for something similar. I went to India to arrange the report, but it turned out to be more challenging than expected.

Clara: What made it difficult to work with the Indian government?

Richard Herd: They had a more traditional, paper-based system at the time. I received an invitation after I had already left India! The bureaucracy was not as modernized as in China, which caused delays and confusion initially.

Clara: How would you compare the Indian and Chinese governments in terms of collaboration?

Richard Herd: The Indian government is much more open to discussions and expresses a variety of views. In contrast, Chinese officials tend to follow a government-determined line with less openness. India feels more like any Western OECD country in terms of transparency. Moreover, China has become increasingly more restrictive in recent years.

Clara: India is known for its open-mindedness, while China has seen impressive economic growth. How do you view these two countries' trajectories?

Richard Herd: India initially followed an economic model that emphasized government control, including high tariffs and labor market regulations. This made hiring difficult for businesses. China, on the other hand, shifted away from the Soviet-style model in the late '70s and early '80s, encouraging private enterprise. While the American media often portrays China as a state-run economy, in reality, the private sector in China has grown significantly. For instance, Chinese companies like Tencent have led innovations in digital payment systems long before Western counterparts.

Clara: Do you think China’s economic model is driven solely by the government?

Richard Herd: No, not at all. While there are state-owned enterprises, the private sector plays a major role. For example, I used a Chinese AI model called DeepSeek, created by private sector companies without government involvement. Similarly, Chinese companies like Tencent, which is privately owned, have been pioneers in the digital payments space. There is certainly state support, but the private sector has thrived as well.

Clara: That's fascinating. It goes against the narrative of a completely state-controlled economy. What made you focus exclusively on Chinese economics after working in both India and China?

Richard Herd: The Chinese economy had already shown great potential, and the shift towards a more private sector-oriented model made it especially intriguing. As China embraced more private enterprises, I found myself increasingly involved in studying China's economic developments.

Clara: Has China's economy met your expectations?

Richard Herd: China’s growth was incredible, and it surpassed my expectations. However, in the past few years, I've been surprised to see India's economy start to gain traction. For example, the share of iPhones made in India has increased from just 4% to 14% in just five years. It seems that India is now on a growth trajectory of its own, whereas China is facing a slowdown.

Clara: What are your thoughts on the global impact of China's rise?

Richard Herd: China’s rise has been a success in many ways. It provided affordable goods to the global market and improved the lives of hundreds of millions of Chinese citizens. However, this has had consequences for developed countries, with job losses in certain sectors as a result of cheaper imports. It has also contributed to global shifts in manufacturing and trade.

Clara: What do you think of the impact of U.S. tariffs on China and the potential aggravation of tensions?

Richard Herd: China will likely respond, as it already has by targeting U.S. agricultural exports. The impact on the U.S. will be higher costs for consumers, particularly for products sourced from China. For instance, products sold at stores like Walmart may become more expensive due to tariffs.

Clara: Do you think these tariffs could lead to a global recession?

Richard Herd: If tariffs are implemented, we could see inflation rise in the U.S., which would reduce purchasing power and lower consumption. This could slow down the U.S. economy and have ripple effects globally.

Clara: What about the European Union?

Richard Herd: The EU could also be impacted if U.S. tariffs lead to more expensive imports from China. Countries like Canada, which export goods like aluminum to the U.S., will also feel the pressure. The global trade system could experience significant disruptions if retaliation leads to higher tariffs worldwide.

Clara: Is it possible for the international community to create a unified response to the U.S. tariffs which, subsequently to the interview, have proved to be in line with the worst scenario that you presented to the conference?

Richard Herd: It’s very difficult to get a united front because of differing interests. While organizations like the UN or the World Trade Organization can serve as forums, it would be more effective if major economies, such as the G7, coordinated a response. But even then, aligning China and other countries against the U.S. would be challenging given the current political climate.

Clara: Finally, how do you think the Trump administration’s economic policies are affecting the global economy?

Richard Herd: The policies have been largely negative for global economic stability, especially with the trade war and the withdrawal of international aid. These moves have had a direct impact on developing countries, which are particularly vulnerable to rising debt costs and inflation. The economic tensions have also contributed to the rise of populist movements, as people in developed countries see slower income growth and rising costs. The scale of the tariff increases has exceeded most commentators' expectations. The method of calculation has no economic justification. The apparent final goal of the administration, to balance bilateral trade deficits with all countries, makes no economic sense.