Given the news announced this week that China is among a very small number of countries to post growth last year, I thought it might be timely to revisit how investors reconcile economic performance with politics.
In June last year I sent out a piece commenting on the state of Hong Kong (Hong Kong and the new national (in)security law). The editorial made clear my regret that a new national security law had been imposed on Hong Kong but concluded that it should not have come as a surprise to investors. It went on to point out that Hong Kong’s significance in the global financial scene had grown over the last couple of decades despite Beijing’s recent ministrations. Several investors in the US and Europe who read the note wrote back to me suggesting I was being too harsh on Beijing. One asked me to name another country which had had successfully run a small part of its sovereign territory under a different set of rules from the rest of its demesne. Scotland jumped to mind but I decided to keep this to myself for fear it might prove his point!!
Last month I wrote another piece on the postponement of Ant Financial’s listing in Hong Kong and Shanghai (China’s Robber Barons?). Again, in a nutshell, the piece sought to draw a parallel between the anti-trust legislation of the 1890s in the US, designed to curb the monopolistic excesses of a small group of powerful American tycoons, with Beijing’s recent initiative in the same direction. That the treatment meted out to Ant and its founder Jack Ma had historical precedent prompted an equally immediate, and critical, response from a couple of investors, this time based in the UK: “Is Aubrey in the pay of the Communist Party of China?!!”
Despite the diametrically opposed opinion from those reading the notes, we do try to take a coherent approach towards China for the benefit of our investors. Read together or separately my commentaries set out the following position: that the Chinese Communist Party has engineered one of the greatest migrations in history, moving perhaps as many as 350m million people from rural poverty to an urban way of life that is better for most. And all this has been achieved in a generation. It would be marvellous to believe that it could follow this miracle with an equally amazing transition to democracy for despite all its faults, as Churchill said, it is the best form of government there is. However, it should not come as a surprise to any investor that one miracle is all that Beijing is up for just now.
Adding initials to existing acronyms is not unknown (LGBT has been joined by Q). Perhaps consideration should be given to tagging on a couple more to “ESG”? P and D for example standing for Political Democracy or H and R for Human Rights? No prizes for guessing my position on this but for anyone of you who might still be wondering, Aubrey has not received a red cent from Beijing.
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