What can we learn from China?

I notice that, in the year  2009 so far, more money has been  raised in  initial public offerings  on the Chinese  stock markets than  on the American markets, almost twice as much in fact. This is a result of  the Chinese economy is  growing at  about  8% a year, while the economy is stagnant in  the  western  world.  It is also  due to the  fact that  Chinese  consumers have a  tendency to save  that is greater  than in the  west, and some of those  savings are  going into the  Chinese  stock markets.

All this suggests to me  that western  countries which  face huge requirements to modernise their infrastructure, their electricity grids,  their  telecommunications networks and  to create new  green sources of  energy,  should look to the Chinese  stock markets as a  source  of funds.

I hope that Chinese investors will be more willing that some western investors to look for long term   returns, rather than expect  big  short term gains on a  quarterly basis.

Some of the western banks , who made  foolish  lending decisions , did  so in pursuit of short term increases in market share rather  than in line with a balanced  growth strategy, and they did so because  investors and analysts were  criticising them  for not  expanding fast enough. But few are criticising the analysts and investors ,while everybody is criticising bankers!

Likewise it would be interesting to know which management consultants designed the  remuneration packages that  led many bankers off in a mad pursuit of  short term  gains? Of course bank boards of directors could, and should, have rejected the consultants advice. But the consultants are all still in business, while some of the bank directors have had to take responsibility and depart the scene.

In essence, our task now is to redesign  western capitalism on a  sustainable basis where long term considerations get  due weight. 

Given that so much investment  activity takes place to  create a future flow of funds  for pensions, one would think that longterm thinking should be  what it is all about.  I believe  Chinese thinkers do look to the longterm and  that  is one reason  why we  should consider  China as a source of funds  for  modernising our economic structures in the  western  world.