I notice that, in the year 2009 so far, more money has been raised in initial public offerings on the Chinese stock markets than on the American markets, almost twice as much in fact. This is a result of the Chinese economy is growing at about 8% a year, while the economy is stagnant in the western world. It is also due to the fact that Chinese consumers have a tendency to save that is greater than in the west, and some of those savings are going into the Chinese stock markets.
All this suggests to me that western countries which face huge requirements to modernise their infrastructure, their electricity grids, their telecommunications networks and to create new green sources of energy, should look to the Chinese stock markets as a source of funds.
I hope that Chinese investors will be more willing that some western investors to look for long term returns, rather than expect big short term gains on a quarterly basis.
Some of the western banks , who made foolish lending decisions , did so in pursuit of short term increases in market share rather than in line with a balanced growth strategy, and they did so because investors and analysts were criticising them for not expanding fast enough. But few are criticising the analysts and investors ,while everybody is criticising bankers!
Likewise it would be interesting to know which management consultants designed the remuneration packages that led many bankers off in a mad pursuit of short term gains? Of course bank boards of directors could, and should, have rejected the consultants advice. But the consultants are all still in business, while some of the bank directors have had to take responsibility and depart the scene.
In essence, our task now is to redesign western capitalism on a sustainable basis where long term considerations get due weight.
Given that so much investment activity takes place to create a future flow of funds for pensions, one would think that longterm thinking should be what it is all about. I believe Chinese thinkers do look to the longterm and that is one reason why we should consider China as a source of funds for modernising our economic structures in the western world.