It is indeed ironic, and no one might have predicted this, that in times of need, the developing world will come to the rescue of the ailing developed economies. The eurozone, rather grudgingly have accepted this new role with the west now gradually being reshaped, and in some aspects humiliatingly by Asian wealth. In order to feel the pervasive air, all you need to do is wakeup, open the international pages of your daily newspaper, and while sipping at your freshly brewed coffee that your wife has left on your breakfast table, read about European leaders, frolicking around at their best behaviour around Chinese officials, hoping for a bailout. That’s almost as desperate as borrowing cake from your next door neighbour on your child’s birthday. Pretty embarrassing for the kid, and let’s not delve into the awkward position you put yourself into.
What is most intriguing is, that after decades of being mocked, mimicked, and ridiculed for whatever reasons, the Asians and their investment decisions are now supporting and in fact in other instances even rescuing European and North American businesses. Let us consider the various news reports that have recently made the rounds. First we have the example of Saab that finally this week filed for bankruptcy following a rather turbulent journey after the takeover by a Dutch carmaker that failed to meet sales targets. The result was, that production more or less came to a halt.
In contrast we have Volvo. Round about the same time, when General Motors sold Saab to the Dutch carmaker, Spyker Cars, Volvo was taken over by Geely that is considered as the second largest carmaker in China. In comparison to the European counterparts, Volvo has prospered under the Chinese carmaker, and as far as one can understand the company has a stable and bright future. Geely, will also soon have the distinction of becoming the first Chinese car manufacturer to launch their vehicle in the British markets, with their car put on sale towards the end of sometime next year.
The moral of the story is, and to put it rather crudely, Asian motor companies have been able to transform European and Western companies that were flagging, in a way that has boosted their overall performances, a point that can strongly be reinforced by the brilliant performance of Tata with Jaguar, Land Rover. Which then reinforces the argument, that the Asian’s are not as stupid as the West has made them out to be for a long time now. Secondly, the reverses in the West ring alarm bells of opportunity for the East.
Despite, all the cynicism, when hard facts are analysed it will be learnt that more than 1/3rd of all the worlds savings originate from Asia. For us, a crisis merely marks an opportunity to buy the remnants of a glorious empire that fell folly to its own hubris, to the fallacy of its own policy making. Thanks to all the chaos, we get the opportunity to bottom fish the prizes once again. And it is not only the Chinese money that is now snapping up bargains from the Western powers, the trend is picking up in the oil rich countries of the Middle East as well. For reference, you need only look up the recent purchase of $300m stake in Twitter by Prince Alwaleed bin Talal. Despite the loss of control, for countries like Britain and much of Europe this change in dynamics does not point towards complete hopelessness but an opportunity to invest in Asian markets. After all, the wise would remember that Britain, amongst other western countries earn more from investments made abroad, than it pays out in dividends and other remittances. The mindset of the Asian investor, can be summed up in what the head of Fosun, Liang Xinjun, China’s largest private sector conglomerate, said, “EU-US consumer spending has deteriorated in the last three to four years and will continue to fall in the next four to five years. Growth of their enterprises will be limited or even fall. So we can buy about 10 to 30 per cent shares of their companies, become their top or second shareholder, and then bring them into the Chinese market to grow.”
And so, ladies and gentlemen, let me welcome you to the new Asian century.
The writer is chief manager SME bank and has over 30 years of experience in the banking industry
