Cornucopia

by John Kinsella

  The economic power of Southern China was nothing new. In the sixteenth century the Portuguese had described Canton as rich in agriculture and fisheries, producers of rope, cotton, silks and pearls, possessing iron ore deposits for the manufacture of pots, nails, arms and metal goods of every description. Labour was skilled and abundant, and merchants had exported a profusion of goods under the control of a well organised system of administration composed of powerful mandarins.

  Kennedy had travelled across Europe, Russia, the USA, the Caribbean and South America, all different yet the same. In China the feeling was that of another world, familiar, yet so very different.

  He dozed off and slept for an hour or more. When he awoke it was dusk and the lights of the city twinkled beyond the broad river where boats moved slowly transporting their cargoes to and from the open sea fifty miles to the south.

  He sat on the edge of the bed, zapped on the television and as he wondered what to do next when his mobile rang. He did not recognise the number.

  “Hello. I hope I’m not disturbing you. It’s Lili. We met on the train.”

  “Oh yes. Hello Lili.”

  “I was wondering what you planned to do tomorrow. Perhaps I could show you some of the sights of Guangzhou?”

  The surprise was complete, but Kennedy quickly found his voice.

  “Well I’ve got nothing special planned apart from a little sight-seeing. Yes, that would be very nice.”

  “Fine, I’ll meet you in the hotel lobby at say eleven. How does that sound?”

  “Great.”

  “So, I’ll see you tomorrow. Have a good evening,” she said and rang off.

  Kennedy pleasure was immense; tomorrow he would have a guide and a pretty one at that. He bounded off the bed, reinvigorated and suddenly feeling hungry. It was time to shower and explore the hotel.

  PART TWO 2011

  THE OTHER FACE

  The fact that Pat Kennedy was still in love with Middle Kingdom was more to do with Lili than the exploits of modern China. He was in the honeymoon period that all those who discover a new country experience. Whatever Pat’s feelings for Lili he was not naive, he had glanced behind the scenes and had discovered China’s other face. A face that was not so very different to that of the UK’s a century or so earlier, where children worked ten hours a day, where miners and steelworkers slaved, where small holders struggled to make ends meet, and where after the introduction of mass production millions laboured in wretched factory conditions for wages that barely allowed them to exist.

  In twenty first century China there were blighted industrial regions that resembled certain parts of contemporary Britain, where many of Her Majesty’s citizens lived in no-hope misery, where generational unemployment was commonplace and contrary to popular belief not all of them watched footy on the latest HD TV with a can of beer at the ready.

  Kennedy’s friend, John Francis, could have explained the effects of rapid, poorly planned, industrialisation and its negative effects. What was good for capitalists out for a quick buck was not the same for those who would live in the rust belts that were left when industry moved on.

  China’s phenomenally rapid economic leap forward, which had promised an Asian century, was now beginning to show the first signs of the ills industrialisation had brought to Manchester, Sheffield, the Ruhr, Pittsburgh, Detroit and more recently the industrial heart of post-Soviet Russia. Everything moved faster, including the decline of China’s heavy and state owned industries.

  After decades of spectacular growth China was slowing down and would have to adapt to the conditions of a more mature economy. The dash for wealth and prosperity had run its course. Countless millions of peasants had been left behind, stuck in the trap of rural poverty. Those who had made the quantum leap to modernity were discovering that growth fuelled by massive credit was unsustainable. They, like others elsewhere in the world, would learn that ever rising living standards were a chimera.

  Large parts of China’s industrial landscape were beginning to look bleak, an ecological nightmare. A crippling legacy of disease provoked by industrial pollution and unsustainable debt, the cost of which would fall on the shoulders of future generations. Who would pay for the clean up? Who would care for those whose health was destroyed? Who would repay the debts?

  *

  A question academics like John Francis frequently asked was: How long would the West continue to rule?

  It was a difficult one, considering a recent challenger for the title: Japan, had failed to achieve the destiny promised by economists and crystal ball gazers in the eighties. Instead of dominating the world’s economy it had contrary to all predictions plunged into more than two decades of stagnation and decline, aggravated by a natural disaster of huge proportions.

  The next postulant, China, was now facing its own problems. Problems that dwarfed for example those of the EU, a union of democratic nations with open economies, which in spite of its ongoing economic difficulties, and the threat of a Brexit, enjoyed the kind of prosperity and freedom most Chinese could only dream of.

  With the sudden and unexpected rebound of the USA, China’s hope that it would become the world’s leading nation was beginning to look like a vain hope. Its problems were multiple, starting with its one child child policy which was beginning to take the form of a demographic time bomb. As its population aged China would be confronted with the kind of problems experienced by Western societies: environmental protection, pollution, health, pensions and care for the elderly, but on a gigantic scale.

  China’s National Academy of Sciences calculated that air pollution, caused by coal fired power stations, would reduce life expectancy by an average of five-and-a-half years for the five hundred million people living to the north of the Huai River, situated in central China between the Yellow River and Yangtze River. In addition industrial poisoning was present on such a vast scale that millions of Chinese would die prematurely and the regions in which they lived would be transformed into a toxic wasteland.

  In a sense China’s development resembled that of the Great Leap Forward, a blind rush to development, from which the fallout out would spell disaster for countless millions of anonymous Chinese.

  Beyond China’s extraordinary achievements lurked a hidden cost, an unimaginably heavy toll to be paid by its population. Once world beating industries, such as Rongsheng Heavy Industries, the world’s largest private shipbuilder, struggled with overcapacity, falling demand and debt, a model reminiscent of the Soviet Union’s failed industries. The state picked up the bill, squandering its reserves on unrealistic plans and obsolete industries, pursuing policies that had proven so infructuous in the UK, East Germany, Poland, Japan and Korea.

  GOLD

  Fitzwilliams was used to market surprises and remembered how in early summer 2011, just when he was congratulating himself on his bank’s almost miraculously escape from the economic crisis that had struck in 2008, how a new and unforeseen shock had jolted him out of his complacency.

  The bank had emerged not only unscathed from the chaos of the economic crisis, but was reinforced and enjoying the warm glow of success as the INI Banking Group went about developing its interests in Russia and Asia. In July 2011, banking shares plunged, then in August they hit depths unexplored since the Lehman disaster. More than sixty billion pounds were wiped off the value of UK companies in the worst one-day stock market crash since 2008 with fears of a new credit crunch as banks struggle to raise funds.

  Amongst the hardest hit was RBS, plunging eleven percent, with Barclays down by over eleven and Lloyds by nine. The plunge was provoked by the rumour that an unnamed cash strapped eurozone bank had tapped an emergency ECB lending facility for five hundred billion dollars, and amongst other unconfirmed reports was the news that American branches of European banks were repatriating dollars to support their parent companies.

  Asian Pacific markets followed the trend with the Nikkei down over two percent, the Kospi over four percent and Australia’s m
ain index nearly three. In New York the stock market gyrated wildly following Standard & Poor’s decision to downgrade the country’s long-term credit rating. Not since 1928 had the market seen such large fluctuations over such a short period of time.

  The degree of concern was very real, if the American economist, Nouriel Roubini, was any reference. He tweeted: when banks & deposits arent safe & govs are bankrupt time to buy canned food, spam, guns, ammo, gold bars & rush to your mountain log cabin.

  Marc Faber, otherwise known as Doctor Doom, said financial conditions were worse than they were prior to the crisis in 2008. Faber, the Hong Kong based investment manager, publisher of ‘The Gloom Boom & Doom Report’, a monthly musing about the state of global economics and geopolitics, added the political system had become completely dysfunctional.

  Fitzwilliams, a hard headed banker, neither pessimist or optimist, saw Faber as a kind of Grinch, who in spite of his all pervading pessimism was right when he said fiscal deficits had exploded and the political system completely dysfunctional.

  However, the banker did not panic, he sensed it was one of those summer flash crises that would disappear as fast as it had appeared. Contemplating his annual break he suppressed his unease as market volatility rose like mid-August temperatures, hoping the Arab revolution that was spreading across the southern Mediterranean shores was not a bad portent for things to come.

  The price of gold was a sign that seemed to confirm Faber’s point of view as it hit a record high of $1,826 an ounce, rising by more than a fifth in a month, a sure indication that faith in paper money was plunging. It did little for Fitzwilliams bank, after all he couldn’t transform all of the banks assets into gold.

  On the other hand the gold peak was good news for Tom Barton who instructed his broker to sell his holdings. Experience had taught him that the market was nearing its limit and sooner or later gravity would do its work. He had made a huge profit since he had bought the metal three years earlier and it was time to reinvest his gains elsewhere. Investors had been deserting riskier assets for safe havens and had seen gold, along with government bonds, to be one of them. In the, US Treasury bond prices rose and the yield on 10-Year T-Notes fell below two percent for the first time since the early 1950.

  The prospect of a much talked about double-dip recession had little effect on Barton’s buoyant mood, he had made solid gains over the previous twelve months, which prompted him to start look for building land in Dominica along the coast from Roseau. With the return of market turmoil frightened investors dumped stocks and Barton reasoned with depressed property prices and few buyers around the moment was ripe to make a good deal.

  A NEOPHYTE

  As Kennedy studied the dazzling collection of potential buyers seated in the front section of the vast auction room, he noted the predominance of very wealthy Chinese, many of whom he recognised were from the Mainland. To the back was standing room only and to one side were the telephone bidders representatives seated on a raised platform.

  Their confidence and affluence was part of the enigmatic Chinese puzzle, the vast nation’s wealth and possible dangers ahead. Nonetheless he reasoned it was a positive sign for the INI Property Fund, its investments offered worried Chinese investors a refuge in London or New York if things went bad, since the rich would be the first to run for cover.

  S

  otheby’s Hong Kong

  Pat was a realistic neophyte, the first to admit analysing country’s economy was beyond him, and most certainly beyond many Chinese themselves. China like the Chinese was complicated. The data was contradictory, on the one hand there were the contrarians who predicted the imminent explosion of the Chinese property bubble, and on the other investors were still pouring money into the Middle Kingdom’s economy. Listening to Lili he figured the real situation was somewhere between the two lines of thought.

  He had witnessed the wealth of the Beijing, Shanghai and the large coastal cities as well as the poverty of the countryside. However, mega cities like Chongqing and Harbin and other more distant places were vague names that meant almost nothing to him.

  Kennedy, INI’s number two, was, amongst other things, head of business development, in brief a wandering emissary. He was Fitzwilliams’ eyes and ears in the broader world. The CEO had a total confidence in his friend. He was not only aware of Pat’s strengths and weaknesses, but also his ability to see things that few others saw.

  The Chinese miracle was a reality, a powerful echo of similar transformations that taken place in Europe, Japan and Korea decades earlier. Looking at China it was worth recalling the misery that had stalked the poor in the US, Great Britain, France and other so called enlightened nations on the eve of The Great War. It was only after the second war the lives of many peasants in France and miners in Great Britain started to change with the dawning of the consumer society. Until then large swaths of the populations, in those countries, which continued, momentarily, to rule over vast imperial possessions, lived in conditions that were not so different to the lives of those in many parts of China prior to Deng Xiaoping’s reforms.

  In Spain and Portugal, widespread poverty lingered into the fifties and sixties, whilst Bulgaria and Romania remained mired in poverty until the downfall of Soviet style Communism.

  Pat Kennedy determined to learn more, plunged himself into Chinese history, avidly reading works such as the biography of Mao Zedong by Jung Chan and Jon Halliday, or Jonathan D. Spence’s book The Search for Modern China. His elephant-like memory won him the admiration of the Chinese he met by citing the names, places and dates that marked Chinese history.

  As the instrument of the expansion of Fitzwilliams’ bank, Kennedy had opened doors, pointed the way, befriended rich and powerful foreigners, who, in the past would have been exclusively cultivated by those in Downing Street and Whitehall with the help of their establishment friends in the City, British banking and financial institutions.

  Fitzwilliams, though part of the Irish landed gentry, was a product of the British establishment tradition; a scion of Anglo-Irish aristocracy, a family whose minor and very conservative bank would have normally been destined, sooner or later, to be absorbed into one of the mainstream banks in the City’s march towards globalization; a legacy of Thatcher’s ‘big bang’.

  But that was not to be. Thanks to Kennedy, the Irish bank had taken a different direction. It was he who had pointed the way towards continental banking and the fusion with an old Amsterdam bank. He then followed up by engineering a partnership with Sergei Tarasov’s Moscow bank, creating a powerful multinational banking group about to join forces with the Wu family and expand into Mainland China.

  Fitzwilliams followed no preconceived empire building strategy, his ambition was simply: growth, wealth and power. With his charisma the banker attracted men of daring and talent and like many successful leaders he was was a highly skilled opportunist. When Kennedy opened a breech, Fitzwilliams led the way forward, using the resources of the City of London to exploit new conquests.

  Kennedy was more a twenty first century adventurer than a banker. He used his instinct to flair opportunity. His brash thick-skinned style knew no obstacles, perhaps it was naivety, but little discouraged him from going where fortune led. Thanks to Fitzwilliams he had gained a new authority and acquired a solid veneer of class with the power he represented, creating an aura of distinction around him wherever he ventured.

  He did not need a large entourage of consultants, organisers and planners. He followed his intuition, allowing himself to be carried by the current, gravitating into rarefied circles on the strength of his name card. There, where powerful decision makers met, he mixed in naturally, without flaunting contacts, or promising the earth. Details he left to the specialists, the role of whom was to transform the ambitions and hopes of others into bankable reality.

  The banking group’s glossy brochures, filled with figures, statistics, graphs, results, photographs of board members and leading shareholders, flattering images of the b
ank’s London headquarters, maps, achievements and goals, obscured the hazards of fate that had created the group. Fitzwilliams’ banking empire now radiated from the City of London to Amsterdam, Moscow, Vladivostok, Hong Kong, Shanghai and of course the Caribbean, and was represented in major cities of importance across the planet.

  The group’s rise had been meteoric, fifteen years earlier few would have recognised its name not to mind foresee its future success. It had survived the financial crisis that followed the collapse of Lehman Brothers, it escaped the British banking Armageddon almost unscathed, it had survived the euro crisis, and now it was poised to conquer China and East Asia.

  There were those who feared another bubble, a mega-bubble, one that would mean disaster for China and those who rode the dragon: Francis was one. To the academic, who headed the bank’s think tank, history was nothing but a cycle in which empires rose and fell, whether they were ruled by kings or business magnates. Francis believed those cycles were becoming faster and China’s with its turbulent recent history could tip the world into a crisis of unimagined proportions.

  Not only had the world become a more complex place, it was more dangerous. The world did not function logically, it was governed by men, the most dangerous, greedy and unpredictable of its creatures. The idea that someone, somewhere, was forming a sane and logical plan for the future of humanity was far, very far, from reality. The shifting sands of history could be seen in the South China Sea, where China’s military it flexed its muscles, where the Middle Kingdom’s territorial ambitions threatened the integrity of its weaker neighbours.

  Such considerations were far from Pat’s mind when the bidding started. The high point of the evening was a blue and white Ming Dynasty vase estimated at ten to twenty million US dollars and two ink paintings by Bashi that were expected to break a record, with total sales expected to pass the one hundred and fifty million dollar mark.