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Thursday, February 01, 2007

A strange intersection 

By Charlottesvillain at 2/01/2007 08:39:00 AM
The New York Society of Securities Analysts recently held their annual forecast dinner. Financial market forecasts are a lot of fun, and while their track record on an empirical basis is probably akin to actually reading tea leaves, forecast events tend to collect a bunch of smart people in a room for interesting discussions, and you hear perspectives and ideas that are new to you.

One of the participants at NYSSA's recent event was Ian Bremmer, president of Eurasia Group. Bremmer is a political scientist who has carved out a niche advising investors on global political risks. I don't know whether anyone makes money from his advice, but he is a brilliant speaker and always thought provoking. At the NYSSA dinner he introduced an idea I hadn't heard before.

"The big question is what happens to China long term. Globalization in China creates less political stability. Economic growth in China may create more stability, but at the same time you have the question of to what extent the authoritarian Chinese system can continue to manage those two tendencies. In this regard I think it is a tremendous misfortune of timing that the Beijing Olympics are happening smack dab in the middle of US presidential elections. All you need is one or two little things to not go well and suddenly there's going to be all the concerns about human rights and everything else. What would it take for the Chinese Olympics to not be a great story, and for that to feed into US protectionism in 2008?"

It is not particularly profound to note the tensions within China between a growing economy and a rapidly modernizing population and the authoritarian government. The Olympics, and the attention they will bring to China's successes, and maybe failures, is certainly something to watch. That these events could have a disproportionate impact on US policy due to the election cycle is a very interesting idea.

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9 Comments:

By Anonymous Anonymous, at Thu Feb 01, 10:51:00 AM:

No western eyes will see Chinese failures.  

By Anonymous Anonymous, at Thu Feb 01, 10:56:00 AM:

I'd like to bet that Chinese scientists are right now developing ergogenic substances not detectable by IOC standard tests.
See the superiority of our athletes and our culture.
The Californian training camps beter up their, - er - efforts.  

By Blogger D.E. Cloutier, at Thu Feb 01, 10:56:00 AM:

Charlottesvillain: "....carved out a niche advising investors on global political risks. I don't know whether anyone makes money from his advice...."

"Political risk" is an important field to international businesspeople. Companies of all sizes can take out "political risk insurance" to protect themselves against financial loss from political violence (revolutions, etc.), government confiscation of assets, government repudiation of contracts, etc.

A few personal comments about China:

1. The national government in Beijing doesn't hold a tight leash on a large part of China. As some of my customers in the south of China often say, "We are a long way from Beijing."

2. Most Chinese political and business leaders believe in gradualism (the policy of approaching a desired end by gradual stages).

3. Gossip from a Beijing bar: A sizable number of children and grandchildren of Chinese leaders have American or Canadian passports.  

By Anonymous Anonymous, at Thu Feb 01, 10:59:00 AM:

OOPS, DEC, nearly trod on your toe there <:-))
Scuse me.  

By Blogger D.E. Cloutier, at Thu Feb 01, 11:59:00 AM:

No problem, Anonymous.

Eurasia Group lists the top seven political risks for 2007:

1. Iran
2. Nigeria
3. Iraq
4. Turkey
5. Russia
6. China
7. Afghanistan/Pakistan

More at:
http://www.eurasiagroup.net/  

By Anonymous Anonymous, at Thu Feb 01, 12:10:00 PM:

I can't believe Eurasia Group clients do very well heeding its advice if it doesn't see fit to place Venezuela in its Magnificent Seven.  

By Blogger D.E. Cloutier, at Thu Feb 01, 01:18:00 PM:

The best political-risk advisory companies seldom make mistakes. Eurasia Group has an excellent reputation.

Remember, "political risk" revolves around the chances of losing money. If a government seizes your factory and pays you enough for it to prevent you from suffering a financial loss, you are in good shape from a "political risk point of view."

The government of Venezuela has a lot of assets in the United States that are vulnerable to a lawsuit by a American company in a U.S. court.  

By Anonymous Anonymous, at Thu Feb 01, 06:03:00 PM:

"The government of Venezuela has a lot of assets in the United States that are vulnerable to a lawsuit by a American company in a U.S. court."
You say that as though you think this buffoon Chavez is capable of connecting two such related issues and drawing a conclusion. You sir, are an optimist.  

By Blogger D.E. Cloutier, at Thu Feb 01, 06:55:00 PM:

It doesn't matter what I think or what Chavez thinks, Locker Room. The only thing that matters is whether the victim has a way to get his money back.  

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