Walking Away From Reality At Tianjin World Economic Forum

Business, China, Company Strategy, Economics

ChinaNewOpportunities11Sept2014

By John Richardson

SOME of the world’s global business leaders don’t seem to get it.

This is the only conclusion we can reach from their reported reaction to Li Keqiang’s opening speech at the World Economic Forum in Tianjin, China, yesterday.

“Premier Li Keqiang failed to offer global business leaders any fresh solutions to the Chinese economy’s slowing,” wrote the South China Morning Post in this article.

“He disappointed his international audience by failing to offer any new ideas for dealing with a deepening property market slowdown or tackling funding bottlenecks for businesses.

“Many participants left the conference room halfway through the opening ceremony, something rarely seen when a top government leader representing the world’s second-largest economy speaks at a high-profile forum.”

Here is why some business leaders do not appear to get it:

  • Deng Xiaoping was a fantastic, visionary leader of China and his growth model worked marvellously well. It lifted hundreds of millions of people out of poverty.
  • But his growth model has run out of mileage and so it would be pointless for Li, or his boss Xi Jinping, to reverse course.
  • If they did reverse course they would just end up making bad debt and environmental problems even worse, thus making the eventual essential rebalancing even harder, if not impossible.

We worry that a few leaders, especially in the West, are too tied to delivering constant quarter-on-quarter improvements in financial results. This is the nature of the unhealthy links between businesses and Wall Street, where, of course, the objective is to get in at the bottom and get out at the top, regardless of the mess that you might well leave behind (a classic example being the Global Financial Crisis).

Wall Street is again leading business in general, including the chemicals industry, down the wrong path. Instead of building new capacity in preparation for a return  to the “old normal”, companies should be preparing for the global implications of China’s continued withdrawal of economic stimulus. This is a much bigger deal than Fed tapering.

The question you need to ask yourself is this: Will my investment adviser still be around to help me pick up the pieces when everything goes pear-shaped again? Or will he have retired to the golf course, having cashed-in at the right time?

Fortunately, our experience of many Asian and Middle East CEOs, and also some in the West, is radically different to this. They do get the long term, as they live and breathe their jobs. They are desperate to secure the long term prosperity of their companies for social, as well as economic, reasons. And they realise that by taking care of the ‘social’, you actually guarantee long term economic prosperity. Economies are made up of people.

We trust that these guys stayed in the room until Li’s speech was over – or if they did leave it was only because they had essential and urgent company business to attend to.

We believe that the world’s visionary business leaders have already worked out that partnering China, rather than attempting and certainly failing to push China in the wrong direction, is the answer. Their companies will then be able to take advantage of the huge opportunities presented by China’s new economic growth model.

These opportunities are highlighted in the chart above, which we presented in detail at our free China webinar seminar on Tuesday.

If you want a full copy of the slides, and/or you wish to discuss these issues further, contact the blog at john.richardson@icis.com

PREVIOUS POST

Iron Ore and Petrochemicals Share The Same Delusions

10/09/2014

By John Richardson BACK in January we wrote:  “As China’s investment growth...

Learn more
NEXT POST

Another Hammer Blow For China Polyethylene

12/09/2014

By John Richardson CHINA is bringing down the hammer time and time again as it c...

Learn more
More posts
Focus of petchems business must be on meeting medical and food needs
05/04/2020

By John Richardson SEVERAL contacts have said to me over the last two weeks that increased medical a...

Read
Be very, very cautious about buying into the idea of a Q2 crude price rally
03/04/2020

By John Richardson IT IS the unprecedented nature of the demand shock that’s the thing, regardless...

Read
No business as usual despite re-ordering of global polyethylene competitiveness
01/04/2020

By John Richardson THERE ARE sadly no business as usual scenarios, in my view. Under normal circumst...

Read
China: temper your expectations of a H2 recovery for supply as well as demand reasons
29/03/2020

By John Richardson CHINA IS gradually getting back to work, but only gradually because the governmen...

Read
Petrochemical feedstock purchasing managers: What to think about and what do next
27/03/2020

By John Richardson ALL THE old assumptions about how oil, feedstock and petrochemicals markets work ...

Read
Vital work to maintain petrochemicals supply for essential services must continue
26/03/2020

By John Richardson INDUSTRY associations around the world are lobbying governments about the importa...

Read
Polyethylene: How to plan sensibly as we face threat of new Global Depression
25/03/2020

By John Richardson I SINCERELY want to help you guys. That’s what I am here for. To this end, here...

Read
Coronavirus may take as much as two years to be brought under control
22/03/2020

By John Richardson The only honest answer is that none of us know how events will turn out because o...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more