Led by China and the East, the world economy has changed at an unprecedented pace and scale. Shifts in the global pecking order could be even more significant by 2050. The 6th CFA China Investment Conference was an excellent opportunity to learn about some of the change drivers influencing investment opinion. Here are some observations and lessons from my two days in Beijing.
CFA China Investment Conference Takeaways
Macro outlook, geopolitics, green financing, and fintech were among the core themes of the conference. In her discourse on the macro, economist Mo Ji asked the audience to revisit flawed assumptions and misjudgments. Past macro calls on US Federal Reserve tightening and a decelerating China, she explained, were wrong. Through 2018, expect a stabilizing China, financed through taxes instead of debt, Ji said.
Philippa Malmgren provided a refreshing viewpoint for understanding the evolving US-China relationship and China’s approach to the “one belt, one road” initiative, in her keynote address on geopolitics. According to Malmgren, China’s investments in such places as the Suez Canal and Rotterdam, The Netherlands, will reinforce “one belt, one road.” Collectively, these investments will help China gain commercial and diplomatic influence across a wider geographical area.
The green financing discussion focused on the growing severity of pollution, an overview of the green financing market, inter-country regulator collaboration, and the significant opportunities green investing offered.
Fintech presentations provided an insightful overview of diverse topics, including the A (artificial intelligence), B (blockchain), C (cloud computing), and D (Big Data) of fintech.
History and Now
China’s turbo-charged economy and the enormity of what the country has accomplished are amazing.
Less understood is what’s behind the nation’s deep motivation to grow. Perhaps China’s numerous epic monuments help tell the story. To me, these achievements embody the collective aspirations of the people. From the Great Wall of China, conceived in the third century BC, to the Forbidden City, completed in 1420, to China’s gigantic modern buildings and institutions, I sense an underlying drive to excel and expand and a hunger to supplement that desire with discipline and organized hard work.
Alibaba, China’s biggest e-commerce group, is a recent example of corporate success in organizational size and speed. While its revenues are smaller than Amazon’s, Alibaba has a much higher growth rate and handles more transactions every year than both Amazon and eBay combined.
China and India
The contrast between China and India is even more interesting.
There are many dimensions to consider: India’s socio-economic culture has leaned toward self-sufficiency and contentment rather than economic growth. For over 2,000 years, mainly because of invasions from the northwest, India came into intimate contact with the Persians, Egyptians, Greeks, Central Asians, Arabs, and Europeans. The country has adapted and assimilated cultures into her own. Jawaharlal Nehru’s The Discovery of India is a good reference for this history.
Many Chinese inventions have a practical utility — the mechanical clock, gun powder, and movable type. One of the better-known (arguably) Indian inventions, however, is abstract: the concept of zero. This is not to suggest that Indians are averse to economic growth. They are great innovators. But the inherent culture has been to assimilate, not expand.
The economic future for the East and China, in particular, presents many more opportunities than challenges. But there is a risk that tectonic movements in economic power and corresponding capital shifts may lead to significant geopolitical strife. The biggest challenge perhaps is avoiding a Thucydides Trap and getting locked into destructive armed conflict.
Here are some links I found interesting over the last few weeks. Happy weekend.
China and the East
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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