Risk and Opportunity
"Looking forward it would probably surprise many that China is leading the world on climate change..." (Ben Buckler, Baillie Gifford)
Baillie Gifford’s publications provide refreshing injections of reasoned optimism. Enthusiasm about the future drives an investment business. They’re good at it.
Ben Buckler begins a presentation on China (Spotlight on China: Risk versus Opportunity) with a map that shows the journey of the world’s economic centre of mass over the last 2000 years.
The consensus prediction is that the world’s centre of gravity will settle between India and China by about 2050.
The return leg of the journey is about 4x faster than the outward leg, accelerating from somewhere around Iceland into Russia, drawn back primarily by decades of Chinese economic growth.
In 1980 at the beginning of the “return trip”, Deng Xiaoping gave an address on “The Present Situation and the Tasks before Us,” presenting the goals for the coming decade.
Modernization is at the core of all . . . major tasks, because it is the essential condition for solving both our domestic and our external problems. Everything depends on our doing the work in our own country well. The role we play in international affairs is determined by the extent of our economic growth . . . the goal of our foreign policy is a peaceful environment for achieving the four modernizations1. . . . This is a vital matter which conforms to the interests not only of the Chinese people but also of the people in the rest of the world.
From Deng Xiaoping and the Transformation of China by Ezra F. Vogel
The map illustrates the scale of the rebalancing effect of China becoming a “moderately prosperous” country. The journey continues. 2035 is set as the date to achieve “basic modernization”, 2050 as the date for “full modernization.”
Every important journey involves difficulties.2 Overall this journey has been remarkably peaceful. Helmut Schmidt (German Chancellor 1974-1982) assessed China to be the most peaceful country in world history. His perspective is useful as a counterpoint to apparent prevailing perceptions.3
The direction of travel towards a centre of gravity between China and India affects all of us. Travelling requires a balanced view of “risk” and “opportunity”.
Ben Buckler’s presentation gives three examples of opportunities to rebalance what may be default views:
“The biggest emitter of carbon but by far and away the leader in renewable energy capacity.”
“A state dominated economy but one which has led to the emergence of some of the most exciting and innovative private companies.”
“Seen as being unfair to foreign businesses but the largest market for companies like Intel, Qualcomm, Louis Vuitton…”
One of the the biggest risks is that broad generalisations tend to prevent many from seeing the underlying opportunities.
Ben Buckler, Baillie Gifford
The investor’s simplified risk versus opportunity perspective is a useful lens for balanced reflection more generally.
The four modernizations relate to agriculture, industry, national defense, science and technology.
It’s worth watching the exchange in Anchorage in full. Apart from anything else, the translator’s work is impressive (e.g. from 28:30).