China the new frontier?!
If you don't know by know, China is going to be a big deal. Nevermind the BRIC report by Goldman in 2004 or the 11% GPD gain the past quarter, look at the record-breaking IPOs in the finance sector! M&A is also growing at over 25% each year according to Dealogic. While Chinese deals only account for like 1% of all fees generated by all transactions globally, this number is expected to shoot up... dramatically. The most surprising thing of all this is that not until Goldman's 33% acquisition in one of the first established investment banks, INVESTMENT BANKING DIDN'T EVEN EXIST BEFORE 2004. Look where we are at just 3 years later... better yet, imagine where we will be in 10 years.
My question to all the monkeys of the Oasis is, what effect, if any, does this have on us aspiring bankers? Will we be packing our bags and learning Chinese? What is your opinion on China's future?
I don't know too much but I have worked in HK. I don't think it's going to creep up too exponentially any time soon because there's just too much regulatory issues. Maybe in 10 years?
Its good to be optimistic but China still has its challenges to face....
Corruption in the govt. is still a major issue for foreign investors as well as enviroment and poverty. China cover's 7% of the world's land and resources and it must use that to fulfill the needs of 13% of the world's population i.e. its nation.
I have heard it relayed as England ruled the 19th century, America ruled the 20th century, and China will rule the 21st century.
England was still pretty damn strong in the 20th century, and look how long it took America to get its stuff together.
I would say the affect on our generation in Finance in America will be minimal.
Do you think the U.S. will be able to settle for second? Already the media has been positioning China to be a "threat" which I think is still overestimation of what China is capable of doing and a misunderstanding of their intentions.
I think the finance sector in China, particularly in the mainland, is too young and too fundmentally weak to sustain a long-term growth.
Greenspan brought up the issue of overspeculation recently and the Shanghai Stock Exchange is opening some half a million private trading accounts each week and 100 million Chinese is engaged in some form of stock trading. To me, that is not a sign of a booming market but just pure over-speculation.
Given all that, I do believe the Chinese market can become of world's best but I don't think it will be relatively soon.
It's really interesting how many business trends can be explained with culture. Traditionally, Asian countries are devout savers and investors, just look at the interest rate in Japan. It is no wonder that these top financial firms are salivating over the idea of eventually capturing even a segment of this market. Moreover, I think they dream of one day controlling some of China's mammoth pension funds.
albatrosslee,
Who cares if US will be "able to settle?" It is what it is. Considering CNN is talking about that gold-digger, Paris Hilton, and Britney Spears, AGAIN. I don't find it that surprising if China surpasses us.
Ziggy, corruption is an issue everywhere. Look at us with our entrenched politicians and PACs running our government. Is it actually any better?
Yes it actually is better here.
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The worst part is the damn legislation. MS would own the entire company if they, but I believe 33%(I know you state 35%) is also the maximum a foreign company can hold.
I also argue that it won't take that much longer for their banks to catch up. 2008 is a tremendous year. China's hoping to leverage the Olympics as the final symbol of where China stands in the world today.
Should they also take the most Gold ... well then, gentleman, get ready for a whole batch of stupid-protective-tariffs legislation passed in Congress.
Jintao has taken serious measures against corruption in China. Because of his immense power, he's been kicking left and right those he feels that have been in "shady" deals.
I admit that my phrasing was incorrect. United States does have much more visibility cutting down corruption, yet we have our own issues that we have to fix that are significantly hindering us.
Damn. And here I thought China was all about Kung Pao Chicken and Bruce Lee flicks.
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kiwili, I tried looking up the maximum a US foreign can own a Chinese bank and the statistics don't appear to be any relevance at all. It appears every year they're loosening up, although I know for a fact no foreign company can own a majority of a Chinese company.
I do apologize about my incorrect statistic of 33%.
They're running the entire place over. House after house is being rebuilt. I can't wait to see it.You know whats going to be really stupid? When this finally is unveiled and everyone finds out how Beijing is transformed, everyone is going be shocked .. when it's been coming for the last 4 years.
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Please read this book which describes the advantages and the disadvantages of China..
'China shakes the world' by James Kynge
It got the GS business book award 2006
If you'll recall, everyone was saying the same things about Japan 20 years ago and look what happened to it.
Yes, China is a huge country with significant growth. I suspect that due to the fact that it's 5-6 times the size of the United States means that it's extremely likely to pass the US in the absolute size of the economy. However, even as it reaches parity, it will still have a very long way to go before it even reaches the level (in terms of GDP per Capita) found in Korea or Japan.
As for investing/banking in China, I've always been a contrarian investor and I think China is too much of the "hot" thing right now. I'd rather play it safe than stake my future on a bubble.
Yup, you are right, I forgot about CICC. Then again, MS never really controlled CICC.
As far as GDP per capita being on par with Korea or Japan, I think that will be impossible to accomplish given how large China's population is. Already there is a level of income inequality greater than the US and it continues to grow at a worrying rate. At the rate that they are going at now, they will be drowning in social unrest long before their GPD per capita reaches Japan's.
China's treasury has over 1.2 trillion in foreign reserves, they will be able to absorb any financial crisis. The big problem is in the defaulted bank loans.
alba, I disagree.
Income inequality is crucial to every country. Nor is income inequality necessarily bad, only if incomes are not increasing for the poor. Considering the wages of low-class citizens have increased by 7.6% the last year whereas, in contrast, average wage increase for the United States has a nominal rate to that of inflation.
The GINI Index places China at 44, whereas United States is 40 (Higher is worse). If they continued the current rate, they would have nothing to fear. It is when China reaches a "bubble" and definite unsustainable growth (which Greenspan argues is now), income inequality increases and wages remain stagnant that trouble of civil unrest arises.
If we're following the OP's topic, I don't think any of us are caring about GDP, as opposed to sheer economic power.
China and India will overtake United States in sheer economic power. Japan can only do so much with a limited population of 130 million. Considering it does have the second largest economy at 130 million - its population growth rate at 1% holds it down.China on the other hand, is steady at 1.3-1.4 billion. While I do doubt GDP will ever catch up, at least any time soon, future values of China's economic power is a given.
Deloitte gave the highest figure out of the lot, but they mentioned that China may have 25% in bad bank loans... equivalent to $250bn in defaults.
This has been one of the more civil threads we've had in IBO for a while. Thank you all posters for that.
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