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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 main 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.
Sotheby’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. H
e 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 bank’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.
2012
LILI
Pat was as nervous as a young man on his first date when he left to pick up Lili at Heathrow. There were no privileges for Lili, she held a Hong Kong SAR Chinese, or simply SAR, passport, and on arrival had to pass through border controls like any other traveller. The Chinese government did not recognise dual nationality for any of its citizens, however, SAR passports did provide certain advantages for Hongkongers entering the UK.
Strictly speaking Lili was not a Hongkonger, but thanks to the influence of her very wealthy and very well connected family she had acquired the status of a British National (Overseas) before Hong Kong was handed back to China in 1997, when many of the colony’s wealthy families feared for their future under Chinese rule. As it happened things turned out well and the disaster that many had predicted never happened.
It was five-thirty in the afternoon when she wheeled her trolley out of the customs area. Pat’s heart jumped, though the sight of her overloaded baggage trolley was a little disconcerting to someone like him who boasted of travelling lightly.
Preferring a day flight Lily had left Hong Kong mid-morning and had relaxed in the comfort of her first class seat on the long Cathay Pacific flight, almost thirteen hours flying time. She looked fresh and raring to go.
Lili was no stranger to London having spent a year at the LSE as a student, although it had been a confusing sojourn for a young Chinese girl who had left home for the first time. Her visits to London since that time had been few and quick as her business had been focused on China and Hong Kong with the occasional visits to Singapore or North East Asia.
Chinese families and businesses were not frivolous and her vacations to Bali, Vancouver or San Francisco had been short affairs with no semblance to the breaks of Europe’s gilded youth to Ibiza or Marbella, the bling capitals of the Mediterranean, with their nightclubs, stylish designer emporia, mega yachts and Champagne spray parties, where living it up in the sun, on the sand and in beach bars and restaurants was almost a way of life.
Pat had difficulty in concentrating on the early Friday evening traffic as Lili chattered, commenting on the airport security, border controls, the passing scenery and her plans. She asked him about the presence of soldiers in and around the airport and their curious attire, with their desert fatigues it seemed to her as though they had just arrived from Iraq.
Pat had to agree with her
, it was incongruous to see the military in sand coloured battle dress with the dull damp London weather.
“So how long does it take to get there?”
“Where?”
“Your place silly. I looked it up on Google street view.”
“We’ll be there in twenty minutes,” replied Pat as they passed the Hammersmith flyover.
“Is anybody there?”
’No, of course not. Mrs Reilly will be gone by the time we get there.”
“Who is Mrs Reilly,” asked Lili a little sharply.
Pat laughed: “She’s my house keeper, I’ve already told you about her.”
“Oh.”
She placed her hand on his as a sign of regret for her sharp tone. Pat glanced at her fine fingers, the perfect colour of her skin and her beautiful manicured nails. He congratulated himself on finding such a beauty, though at the same time could not help questioning her interest in him considering he was not as an outstanding example of male beauty.
It was a struggle to get all of Lili’s luggage up the to penthouse apartment that overlooked the Thames. Lili headed directly to the panoramic windows to take in the view over Battersea Park and Chelsea’s Ranelagh Gardens on the other side of the river.
“Beautiful,” she said turning around to admire the apartment.
She laughed and threw her arms around Pat. “Are you pleased to see me?”
“Who wouldn’t be,” he said feeling her soft body against his. “Let’s get these inside,” he added pointing to the luggage.
“Where’s our room?”
“There, I’ve made space in the dressing room for all your things,” Pat said leading the way, pleased he moved his affairs to the second bedroom. Lili would clearly be needing plenty of space. “There’s the bathroom if you need it.”
Thames, Chelsea Bridge, Battersea Park
A couple of minutes later she reappeared finding Pat looking out over the Thames. The clouds were clearing and the evening promised to be pleasantly warm.
“What are our plans? Are we going to eat?” she asked with a mischievous smile.
“Up to you.”
“Well I’d like to stretch my legs after the flight.”
“Well we can take a walk on Kings Road, it’s not far, but very fashionable and perhaps you’ll see somewhere you’d like to eat.”
“How shall I dress?”
“Casual.”