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