China -- Watch this Space!
London, UK - 1 March 2007, 10:59 GMT - This seems
to be another instance when China sneezes and the rest of the world catches
a cold. Mainland China shares registered a drop of some 9% on Tuesday
27th, the sharpest one-day fall in a decade, and the world's leading stock
markets all ran for cover.
We are grateful to:
. Andrew Leung based in London for "China -- Watch this Space!";
. Dr Harald Malmgren based in Washington DC for "Complex
Turbulence in World Financial Markets and The China Risk."
Andrew Leung has over 40 years of experience in a variety of senior
positions working closely with Mainland China, including Hong Kong,
with a focus on commerce, industry, finance, banking, transport, social
welfare and diplomatic representation. He has addressed numerous local
and international business and strategic forums, groups and organisations
on China, including making regular television appearances. He has commented
extensively on China for various organisations including ATCA. His audience
includes finance and investment houses, institutional investors, large
businesses, think tanks, senior officials and business schools. Andrew
was twice sponsored personally by the US Government on month-long visits
to the United States, including the last visit to brief Chairmen and
CEOs of multi-nationals post-Tiananmen Square. He was also sponsored
by The Economist as a speaker at the China conference in Berlin with
the German Foreign Affairs Institute. He was invited to brief personally
the Duke of York and the Lord Mayor of London prior to their China visits.
Andrew is on the Governing Council of King's College London; the Advisory
Board of Nottingham University's China Policy Institute; and the Executive
Committee of the 48 Group Club with historical and working links with
the Chinese leadership. He has been appointed as a Global Representative
for Changsha City, China. He chairs the China Interest Group of the
Institute of Directors' City Branch. He is a Senior Consultant with
MEC International. He is a Visiting Professor of the International MBA
Programmes of China's Sun Yat-Sen and Lingnan Universities and a Visiting
Professor at the Graduate School of Management, NIMBAS University, Holland.
Andrew is a Fellow of the Royal Society of Arts (FRSA) and has been
elected to its Executive Committee for the London Region. He was awarded
the Silver Bauhinia Star (SBS) in the 2005 Hong Kong's Honours List.
He has qualifications from the University of London, Cambridge University,
The Law Society and Harvard Business School. He speaks Cantonese and
Mandarin and practices Chinese calligraphy and fine art. He writes:
Dear DK and Colleagues
Re: China -- Watch this Space!
This seems to be another instance when China sneezes and the rest of
the world catches a cold. Mainland China shares registered a drop of
some 9% on Tuesday 27th, the sharpest one-day fall in a decade, and
the world's leading stock markets all ran for cover.
I was asked why at CNBC Europe's Power Lunch TV interview this morning.
After all, the size of China's stock market is not that large. I said
it was a combination of salient factors. First, the China Mainland market
(the 'A-shares') was already showing an alarming sign of being in a
bubble. It has risen by 130% in a single year. Ordinary citizens are
known to raise mortgage loans to bet on shares. In China, where stability
is paramount, there is increasing speculation that the leadership will
be cracking the whip to rein in some of these excesses at next week's
National People's Congress in Beijing. When nervousness mounts, the
mood is that the devil will take the hindmost.
Second, along with Alan Greenspan's warnings about the US economy, the
International Institute of Management (IIM) was re-ringing the alarm
bells about the US's accumulated huge national and consumer debt as
well as her weakening global competitiveness, even in some service sectors
(Policy White Paper -- US Economy Risks and Strategies 2007-2017). More
people are beginning to wonder if the emperor has still got enough clothes
Third, it is not the size of China's stock market but the fact that
China has become so intertwined with the global economy, from financing
US deficit spending, suppressing world inflation and interest rates,
providing off-shored manufacturing, influencing commodity prices, to
diverting international trade and investment flows. All these are magnified
by financial concentration and imaginative leverage amply explained
by our distinguished ATCA colleague Dr Malmgren.
I also said that China's fundamentals remain generally robust. Indeed,
the same IIM Report seems to ask where investors would rather put their
money -- in an economy that continues to spend alarmingly more than
it produces or in one the other way around. That, of course, is a gross
over-simplification. Notwithstanding her dazzling achievements, China
is very much caught in her own success. Huge challenges are looming
in energy constraints, environmental degradation, unbalanced regional
development, declining export profitability, inadequate social and healthcare
provision, and struggles to invent her own products and build a better
brand as a nation.
But China is a land of paradox and opposites, as long exemplified in
her ancient philosophy. She is decentralized as much as she is centralized.
All of the above challenges have been crystallized and flagged up in
her remarkable 11th Five Year Plan (2006-10) including Sustainable Development,
Balanced Development, Innovation, and Governance (if not 'Government')
for (if not 'by' ) the People. Party Secretaries have long had to showcase
their ability to deliver the goods if they want to further their political
careers. NGOs and indeed Christianity are becoming increasingly noticeable.
The road ahead is still long and tortuous, but decades of consistent,
double-digit growth in a country with the population the size of a fifth
of mankind is not likely to come about with a wobbly foundation.
As I mentioned in my recent think-piece (China and the Middle East:
an Eastern Alchemy for Global Harmony, ATCA, 17 February, 2007), China
has recently approved the creation of a State Foreign Exchange Investment
Corporation to diversify the investment of her foreign currency reserve
(initially 'just' its annual increment of USD 210 billion). More than
catching a cold, the world has to watch this space.
We look forward to your further thoughts, observations and views.
For and on behalf of DK Matai, Chairman, Asymmetric Threats Contingency
ATCA: The Asymmetric Threats Contingency
Alliance is a philanthropic expert initiative founded in 2001
to resolve complex global challenges through collective Socratic
dialogue and joint executive action to build a wisdom based global
economy. Adhering to the doctrine of non-violence, ATCA addresses
opportunities and threats arising from climate chaos, radical
poverty, organised crime & extremism, advanced technologies
-- bio, info, nano, robo & AI, demographic skews, pandemics
and financial systems. Present membership of ATCA is by invitation
only and has over 5,000 distinguished members from over 100 countries:
including several from the House of Lords, House of Commons, EU
Parliament, US Congress & Senate, G10's Senior Government
officials and over 1,500 CEOs from financial institutions, scientific
corporates and voluntary organisations as well as over 750 Professors
from academic centres of excellence worldwide.
Intelligence Unit | mi2g | tel +44 (0) 20 7712 1782 fax +44
(0) 20 7712 1501 | internet www.mi2g.net
mi2g: Winner of the Queen's Award for Enterprise in the category