OPINION: A CHINESE investment banker was on holidays in a quiet Australian fishing village when a small boat with one fisherman docked at the pier.
Inside the boat were several large fish. The Chinese banker complimented the Aussie fisherman on the catch and asked how long it took to catch them.
“Not long,” was the fisherman’s reply.
The banker asked why didn’t he stay out longer to catch more fish, as it was only mid-morning.
“I’ve enough to feed my family and sell the rest to the local fish & chip shop.”
The banker then asked, “So how do you spend the rest of your time?”
“I take long, lazy afternoon naps, then play with my kids, go surfing, and stroll into the village each evening where I drink beer with my wife Maria, and play the guitar with my mates. I have a full and busy life.”
The banker scoffed, “I’m from Shanghai and I could help you. You should spend more time fishing and with the proceeds and some borrowings, buy a bigger boat. Then after a few years of hard work, you could borrow more and buy more boats, and eventually you would have a fleet of fishing boats.
And with bigger catches, instead of selling your fish to the local shop, you would sell to the wholesale markets, and eventually you would export directly to China. Chinese consumers love Aussie branded and processed seafood. You would diversify into abalone and crayfish to get even bigger.
The fisherman asked. “And then what?”
“Then you would need to leave this small fishing village and move to Sydney to cut better deals, and eventually open offices in Shanghai, where you will run your expanding Aus-China seafood empire.”
The fisherman asked, “But, how long will this all take?”
“Maybe 15 to 20 years of hard work, working 24/7 to ensure product quality and strong sales. You will need to make sacrifices along the way, maybe not see your family much, but you will learn to wheel and deal, negotiate hard, secure financing, and take over your competitors.”
“But what then?” asked the fisherman.
The banker laughed. “Then we get to the best part. You would announce an IPO and list your company on the Shanghai and Australian stock market. You will become very rich, you would make hundreds of millions of dollars!”
“Wow, hundreds of millions – and then what?”
The Chinese banker smiled wistfully, “Then you would go into a well-deserved retirement. Move to a small fishing village where you would take long, lazy afternoon naps, play with your grandkids, go surfing, and stroll into the village each evening where you would drink beer with your wife Maria, and play the guitar with your mates.”
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While the story may suit some individuals who already have an enviable lifestyle in Australia, (and don’t desire more) it takes the entire national workforce and capital providers to keep Australia’s economy in good long term health. It will be interesting to hear what my panel of Chinese-Australian investment leaders think of this parable at my lunch-seminar on 3 May.
Meanwhile, stories this week point to rapidly lower Chinese investment into global assets.
China’s non-financial outbound direct investment (ODI) slumped 48 per cent to US$20 billion, from the same period last year, suggesting the wave of Chinese investments into global assets that occurred in recent years is now slowing.
Many Chinese firms are reportedly unable to close deals because they cannot secure official permission to transfer yuan into foreign exchange. Click here to read more.
But China’s shadow banking sector is surging as regulated bank and bond financing slows dramatically due to government’s campaign against excessive financial leverage. Off-balance sheet lending surged to a record in the first quarter, especially from real estate developers resorting to alternative forms of financing. Click here to read more.
A reform group chair by President Xi has announced further steps to fight money laundering, terrorism funding and tax evasion, while the head of China’s insurance regulator was dismissed amid investigations over corruption. 3 of the 4 heads of Chinese financial regulatory agencies (securities, banking and now insurance) have been replaced in recent months while the central bank governor is due to retire soon. President Xi is said to be moving his own team into these agencies to guard against financial turbulence, particularly in the insurance sector which saw a surge in investment products issued last year that had little to do with insurance itself. Click here to read more.
Finally, Trump’s move to rein in North Korea by calling on China to make the first move on its neighbour & ally, is taking place just seven months before China’s most important transition of political power — the National Congress which takes place every 5 years. It is during this time that Xi would have expected to be immersed in domestic politics, but now has the added pressure of dealing with the US over an unpredictable North Korean nuclear-capable regime.
Xi’s decisions on North Korea would be complicated by solidifying his power during time, not showing weakness in international affairs, ensuring financial stability as the country deleverages from its credit binge, while continuing his crackdown on corruption. The pressure is on but at least the economy appears to be stable with a 6.9% GDP growth rate recently announced.
By David Chin, Managing Director, Basis Point.* David Chin established the firm 19 years ago, drawing from his experience across Australia and Asia as a ‘top-down’ or ‘helicopter’ analyst and marketer of the region’s capital flows in derivatives, futures, wealth management, and funds management. He was previously Head of Marketing at Sydney Futures Exchange (SFE) from 1990-1996, reporting to the CEO, and is the author of Thy Fiefdom Comes, a fantasy/science fiction novel.
This story (author unknown) was originally about an American and a Mexican but I’ve changed it to reflect the Chinese-in-Australia investment theme. The Chinese-Australian investment leaders at my 3 May lunch-seminar will share their reaction to this parable.
Property Reviewer on Australian Property Journal
