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Newsweek Article
2009
The Continued Rise of the Rest
 
 
The Continued Rise of the Rest
By Rana Foroohar, Newsweek, 18 November 2009
 

While I was attending the Horasis annual Global China Business meeting in Lisbon last week, the world got more proof of Wall Street's utter disconnection from real life, when Goldman Sachs' chief executive Lloyd Blankfein was quoted in the London Times saying he believes he's doing 'God's work.' Apparently, he's also a 'blue-collar guy' and 'everybody should be happy' that he and his peers are on track to take home $20 billion in bonuses this year. A number of the CEOs and other VIPs in the crowd were talking about the piece, and I can tell you that nobody was smiling. Most of the participants were shaking their heads in disbelief at the continued hubris of American bankers. 'Do you think those quotes might be made up?' one Latin American participant asked me.

Having checked with Goldman, I can say that sadly, the answer is no (though a Goldman spokesperson did tell me that the God's work comment was delivered 'as an ironic throwaway comment'). When I attended the same Horasis conference last year, right after the beginning of the financial crisis, I had been surprised by the lack of ire at the U.S. for getting the world into this mess. Now, with emerging markets surging ahead while rich countries patch their wounds with billions in stimulus money and contemplate a low growth decade, I think that everyone felt emboldened to say what they'd been thinking all along – America is useless. Not only have we stashed financial bombs under everyone's beds, we're doing a terrible job of cleaning up the mess, and we're certainly no longer in any position to give anyone else economic advice. As Hong Kong real estate tycoon Ronnie Chan put it, 'If we listen to America, we're doomed. Policymakers there are pushing aside all the rational voices [calling for greater regulation] and the next crisis is already brewing. Who'll pay for it? Probably the American people, because the Chinese certainly aren't going to lend them the money.'

His comments, which garnered lots of applause from the crowd, were made during a session on 'recapitalizing the world,' which very quickly turned into a discussion of how China would recapitalize the world. Goldman Sachs itself is now predicting that Chinese GDP will overtake that of America by 2027, but already this year, China has surpassed the U.S. as the world's largest generator of investment capital, with around $2 trillion to America's $1.4 trillion, according to economist John Ross, a former advisor to the London mayor, now a visiting professor at Shanghai Jiao Tong University. That's a real sea change, and a point that will surely be marked in the economic history books yet to be written.

Much of that money is pouring into markets like Africa and Latin America. Trade deals are often now done in renminbi, and huge commodities buys in such places help China hedge the weakening dollar. While economically beleaguered Western nations can no longer afford to send as much aid money to Africa, Beijing is filling the gap, most recently with $10 billion in new trade loans announced a few weeks back. The continents' leaders are happy to take the money, which often comes with fewer strings attached, at least for the moment. At the meeting in Lisbon, Amadou Hott, CEO of the Nigerian investment bank UBA Capital, said his country's future was 'now more tied to the East than the West.'

It's a mark of the political and economic savvy of Chinese leaders that they don't aggressively stoke this love fest. Chinese premier Wen Jiabao recently wrote off the idea of a 'Beijing Consensus' for Africa, something Western pundits like to talk about, saying 'African development should find its own path.' And at last week's conference, Levin Zhu, son of former Chinese premier Zhu Rongji and head of the Chinese investment bank CICC reminded the audience that China is still a poor developing country (with a per capita income barely above $2000), and that the burgeoning economic relationships between China and other emerging markets in places like Africa are still 'very new, and not that big.'

While plenty of the emerging market financiers and executives in Lisbon were careful to say that the U.S. is still an innovation center, has amazing powers of regeneration, etc, etc, it was clear that the BRICs business leaders increasingly look to each other for their future growth. Conversations weren't so much about how to get exports back to the U.S. on track, as they were about how to overcome South-South trade barriers or cultivate new joint ventures in green technology. China was, of course, in the middle of it all. It's still strong growth is the reason that Latin America and Africa , for the first time in modern history, haven't been worst hit by a global economic downturn. China may not be able to completely pick up the slack from the U.S. yet, but it's getting there. During a final plenary in Lisbon, one Chinese entrepreneur was asked to offer advice to Obama on the eve of his visit to Beijing. His answer: read more about the Middle Kingdom – and get your daughters a Mandarin tutor.


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