What does it require for the UK to be a world-class economy in the 21st century? This is a question we should always ask, but, as we emerge from recession, it needs to be a central policy issue.

I have been struck by how different the debate is here to other parts of the world. Because of the depth of the recession, the focus in the UK has been on the size of public debt and the quantity of government spending. In contrast, there is more focus in Asia on the quality of government spending. It is not only about boosting the economy now, but also about positioning for the future.

In South Korea, the twelfth-biggest economy in the world, a huge government stimulus during the recession included tax cuts and infrastructure spending, but a central focus is on positioning the economy as a global leader in fusion and green energy. In China, the world’s third-largest economy, there is a strong emphasis on positioning in future growth sectors. The only trouble is that they, like us, don’t know what these sectors are, but it is possible to make some educated guesses based on the inevitable longer-term economic shifts.

China is growing by just under 9 per cent, thanks to a huge stimulus and relaxed lending, and the authorities are keen to ensure growth is sustainable. Restrictions on lending to sectors that have little spare capacity are again being introduced. Also last week the Chinese bank regulator urged some of the banks to limit the pace of their lending growth. How UK policymakers must wish they had that problem.

It is not the only issue preoccupying Chinese policymakers. To coin a phrase attributed to the Obama Administration of “Never wasting a good crisis”, one aim in China is to gain a march on the recession-hit West by taking the lead in growth sectors. Last week, China unveiled 20 new industry funds, investing in local companies, seeded by government money but to be funded by private cash and bank loans. Part of the aim is to move investment away from old industries to new sectors such as the environment, software and IT.

Singapore is trying to position itself, like Hong Kong, as a global city. Behind the scenes, Singapore is hoping to discover a general purpose technology. These are those once-in-a-lifetime discoveries such as the phone or computer that can make a huge change to economic wellbeing and drive wealth generation. Success is not the only issue. At the very least, Singapore hopes to create an environment for business to thrive.

It is important that the UK appreciates this pace and scale of change elsewhere. We need to be more global in our outlook, focusing on selling to high-growth markets and we must anticipate the competitive global economy that lies ahead.

First, we need to get out of recession. The rest of the world is in the early stages of recovery. The global policy response of the past year has been synchronised, sizeable and successful. Asia has been recovering for months, yet the best news on this front was last week’s report of strong third-quarter growth in the United States. The mood there is improving but there are deep worries about the scale of the budget deficit.

Strong US growth looks likely for the next nine months or so, but declining core inflation and rising unemployment are still seen as preventing early rate rises. Unlike previous US recoveries, this one lacks conviction. In the past, companies would view weakness as an opportunity to invest for the inevitable rebound. Not now, or certainly not yet. Underlying confidence in the US has been dented so much, the fear is that a private sector recovery will be sluggish. Policy is driving this pick-up.

The picture is similar here. This is a big challenge, as growth is the best way to reduce the UK budget deficit. In the early 1990s, UK fiscal tightening was offset by low interest rates and a weaker pound, allowing recovery. The market expectation is that this will happen again next year, but it cannot be taken for granted.

Low interest rates will help debt restructuring and borrowers. However, much of the good news that low rates provide to equities and housing may already be priced in. For instance, the present ratio of house price to earnings is 4.5. This compares with a peak of 5.8 in July 2007, but it is still high and above the long-run average of 4. In the early 1990s, the ratio fell from 4.6 in January 1990, to 3.1 by October 1995, remaining around that level until 1999. Thus the euphoria greeting the recent rise in house prices needs to be kept in context. It may not be sustained. Add in the likelihood of a jobless recovery, sluggish wage growth and higher taxes and one sees that consumption may not be a strong growth driver.

The economy needs higher exports and more investment. Thus the need to focus on being competitive, encouraging firms to invest and positioning for the future. While sterling’s depreciation will help, there is a need to compete on quality as well as cost.

The Government has analysed many of the issues, identifying shortcomings. In recent years, for instance, there has been the Leitch Review, highlighting a lack of skills; the Sainsbury Review on challenges in science; and the Barker and Eddington reviews on planning shortfalls. But we don’t always follow through on sorting out the problem.

The UK needs to create, like successful economies elsewhere, the right hard infrastructure, such as road and rail, and the best soft infrastructure, boosting skills and education. Yet just when we are trying to become a knowledge-based economy, even our top universities are being squeezed. That seems shortsighted. On infrastructure, it is staggering how badly the UK performs. A study, for the Business Council for Britain, showed the UK 24th out of 27 countries analysed. India and China were not included. France was fourth, the US ninth. In telecoms, we were eighth, but in rail twentieth, road 24th and air 27th. It is a poor show.

Equally damaging is a comparison by the OECD of research and development spending as a percentage of GDP. Some countries spend heavily: Finland 3.5 per cent, Japan 3.4 per cent, the US 2.6 per cent, Germany 2.5 per cent. The OECD average is 2.3 per cent. The UK is at 1.8 per cent.

The legacy of the financial crisis provides a great opportunity to focus on what the UK needs to do to build a truly world-class economy that is growing, balanced and competitive.

• Gerard Lyons is chief economist at Standard Chartered

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