The money managers have started 2016 in a blue funk – but most are too young to remember what kicked off at the end of the 1980s and the fact that, with the exception of the instigator, we weren’t then doomed to years of economic gloom.
In 1988 some clever statistician worked out that the valuation of the land surrounding the Japanese Emperor’s palace in Tokyo was higher than all the real estate in California. Shortly after this revelation the wheels started coming off the Japanese economy and its GDP has, relative to what went before for several decades, flat-lined ever since.
China now has 12 per cent of the world’s GDP, similar to Japan’s share in 1990 which was also 12 per cent. In common with the China of today Japan back then was propelled by massive investment, an explosive credit growth, a huge trade surplus and an overvalued currency. Its stock markets had become the plaything of the gambling private investor. Japanese bosses indulged themselves in a massive buying spree of foreign assets – everything from art to American steel companies. Now it is the turn of the Chinese to be seen to be just as profligate.
In the same way as we are told China is the great God of all things economic, it is amusing to recall in the 1980s Japan was donning the very same mantel. And did the world stop when it realised the Emperor was not wearing the equivalent of California? No it didn’t. Our young money managers are short on history and long on panic. If it was the other way round they would soon realise the world doesn’t live in an economic hegemony for very long. It moves on.
As if on cue one, our planet’s most savvy company, Apple, is reported in the Financial Times’ 21st January edition, to be shifting its focus to India as China’s smartphone market slows down. “Apple views India as the most likely replacement for the booming sales in China that have powered its rise in recent years," it stated. "Apple may soon begin to manufacture in India. Foxconn, the Taiwanese contract manufacturer that makes most iPhones announced plans to set up in India last year.”
I wonder how many are presently worrying themselves silly in Davos about what Chinese flat-lining is going to do to their career prospects, and whether they are entertaining the thought…
