Gradually, inexorably and in some respects humiliatingly, the West is being reshaped by Asian wealth. You can catch a feeling for what is happening at a macro-economic level, when you observe European leaders traipsing out to China to see if they can raise money for rescuing the euro. But more interesting surely is the way the investment decisions of Asia are supporting – and in some instances rescuing – European and North American businesses.
Consider the contrasting stories of Saab and Volvo. This week, Saab finally threw in the towel and filed for bankruptcy. It had been sold last year by General Motors to a Dutch luxury carmaker called Spyker Cars, but under the new owner it failed to meet sales targets and production had more or less ceased. A sad story indeed.
But look at Volvo. About the same time it was taken over by Geely, now the second largest carmaker in China. As far as one can judge, Volvo has prospered under its new owners, is still innovating and has an assured future. Geely, by the way, will become the first Chinese manufacturer to launch a car on the UK market with the Emgrand on sale towards the end of next year.
Two points stand out. One, to put it crudely, is that Asian motor companies seem to be able to turn around flagging European companies in a way that Western companies can't – a point reinforced by the terrific performance of Tata of India with Jaguar Land Rover. The other is that the reverses of the West create great opportunities for the East. Something like three-quarters of the world's savings come from Asia. The last downturn created great opportunities to pick up distressed assets at knock-down prices. Now, thanks to the chaos in Europe, Asian investors have another chance to bottom-fish again.
Consider this comment from Liang Xinjun, who is the head of Fosun, China's largest private sector conglomerate: "EU-US consumer spending has deteriorated in the last three to four years and will continue to fall in the next four to five years. Growth of their enterprises will be limited or even fall. So we can buy about 10 to 30 per cent shares of their companies, become their top or second shareholder, and then bring them into the Chinese market to grow."
It is not just Chinese money that will snap up bargains. Look at the way Prince Alwaleed bin Talal, of Saudi Arabia, has just bought a $300m stake in Twitter. But China is more likely to use its financial clout for the country's strategic purpose, whereas investors from the Middle East and India appear more purely commercial in their outlook. That leads to an obvious concern. We should welcome what Geely is doing with Volvo and absolutely delight in what Tata is doing with Jaguar Land Rover. And, from a national perspective, we should remember that Britain earns much more from its foreign investments than it pays out in dividends and other remittances, a surplus last year on such direct investments of more than £49bn. In one sense, too, we should celebrate the fact that we have assets and a skills base that is attractive to global investors.
Nevertheless, we have to accept that there will be some loss of control. I personally am much more worried about selling British banks to Spanish and other European financial groups, given what is happening to that whole sector. And we can use regulation to preserve national interest, as we have done in the case of airports.
But power follows money and we are in the early stages of a shift in power that will last a generation or more. We can nudge and trim – and I am sure on balance benefit – but we cannot hope to control it.
Why brains are worth more than houses
How much is the country worth? Two studies from the Office for National Statistics out yesterday throw some new light on this intriguing issue... and reach the intriguing conclusion that our brains are worth more than our houses.
One study looks at physical wealth: our homes, what is in them, our cars and other physical objects. The wealth is mostly in homes, which were worth a net £3,375 bn – a gross £4,360 bn less just under £1,000 bn of mortgage debt. The other main form of physical wealth was vehicles: homes account for nearly 80 per cent of total wealth against some 15 per cent for our cars. Since property prices have fallen, we are a little poorer than we were four years ago, but not much.
The other study looks at our human capital – our knowledge, skills and so on. The ONS figure for that is stunning: no less than £17,200 bn. That is a huge number and there are various ways of calculating it. I find the simplest way to think about it is to ask how much our brains might earn over the rest of our lifetimes: how long we are going to work, the output of the value we will produce over that time and so on.
The good news, you might conclude, is that we will earn a huge amount; the bad news is that we have to keep working.Reuse content