Mar 2005
Unmatched in size, appetite and ambition, China inspires fear and awe as no other country can. To understand China's movements on the world stage, we must remember an important truth: the dragon has a date with destiny. Everything China does is influenced, directly or indirectly, by the long run goal of becoming a dominant world power.
The Chinese do not see this destiny as a new height to be scaled; rather, they see it as a return to their ancient roots. China can legitimately claim to have forgotten more than much of the world has known: gunpowder, the plow, and the printing press were discovered by China ages before Europe rediscovered them. China was once a far flung empire, rivaling the status of Rome. Before the birth of the west, before the birth of Christ, the middle kingdom was great.
The Chinese remember their greatness, and it drives them. In sharp contrast, the 20th century was a time of suffering and humiliation for China: Mao's great famine and the crumbling of the iron rice bowl; Japanese brutalization and the rape of Nanking; British exploitation and the sovereign indignity of Hong Kong and Taiwan; disrespect and dismissal on the world stage, even as Chinese labor toiled in the hot sun to build America's railroads, connecting the coasts and enabling the rise of the United States.
With the 20th century's books now closed, China looks to the 21st century... and they know it is their time. In this new century, the dragon will rise again.
As investors, we ignore China's destiny at our peril. Whether we see China as friend or foe is irrelevant; in fact, whether or not China fully succeeds in its ambition may be irrelevant.What is certain is that China's strategic actions, and the resulting reactions, will dramatically alter the global landscape. We are in the beginning stages of a dramatic sea change, potentially more momentous than last century's sunsetting of the British empire and transition to US hegemony.
A shift of this magnitude will create winners and losers on a grand scale, however things ultimately turn out. We must remember that, as investors, it is not our first duty to pass judgment on history, but rather to profit from it.(If the profit is sufficient, we will have time and leisure for moral judgments in due course.) By examining the key elements of China's strategy, we will be in better position to understand and anticipate key movements.This, in turn, will can help guide long term investment decisions.
Dating from Confucius to present day, China's leaders have been consistently presenting wisdom to the people in simple, digestible form. Under Hu Jintao's predecessor, for example, the people were given the "Three Represents."
In keeping with that tradition, we offer the Four Considerations: key elements of China's strategy for achieving and maintaining long-run dominance in the 21st century. In a multipart series, we will examine each "Consideration" in turn, and then take a look at the potential investment themes folded within.
The Four Considerations:
• Ensuring Food Security
• Ensuring Energy Security
• Building Regional Ties
• Knowledge & Technology Transfer
Next, Part II: Ensuring Food Security.
