Why American financial institutions will survive the crisis and competition from China.
Untill we have a new Administration nothing will change, people will keep lossing their jobs and house's only the strong will survive for the nex few years and bank's will be colapsed next year before 2012, and some people will leave this Country for some years !......
The first banknotes were used in China in the 7th century, and the first in Europe issued by Stockholms Banco in 1661.
[The percentage of global market cap that U.S. equities make up has fallen from 35% at the start of 2007 to 28.35% at the moment. At the start of 2007, China made up just 1.89% of global market cap, ranking 12th out of the top 18 countries. Chinese equities currently rank second and make up 8.12% of global market cap! China is followed by Japan, the UK, France and Hong Kong. ]
[After another IPO in Shanghai in November, PetroChina (PTR) became the largest company in the world and made headlines as the first trillion dollar company. While it still ranks number one in its quest for global dominance, it has lost quite a bit of its value since then and is now worth just under $700 billion. PetroChina is followed by Exxon (XOM), General Electric (GE) and Gazprom. ]
(http://seekingalpha.com/article/60431-global-equity-market-caps-u-s-loses-ground-to-china)
In just 2 years US market cap decreases by 20%; while China increases by MORE THAN 300 PER CENT. It???s shocking, but understandable for the country that invented the banknotes.
If U.S. financial institutions are not expanding credit market share in China; it might be too late already.
We will have an industry that will generate economic benefits worth hundreds of billions ... all for the low, low price of trillions of taxpayer dollars!!
one flew over the cuckoos nest in cuckooland
I think you are right about US investment banks dominating in the near future. The whole China economy is too immature for now. The Chinese are quick learners and innovators. They will catch on quickly. Their own opacity will work against them after some time. It will probably have the same effect that it had here, hiding problems. But eventually size will win out.
One big lesson we need to learn is that we must separate basic banking functions from investment banks. The flow of money in credit, savings and checking needs to be virtually secure. This leads to these banks being a high security but low return investment. Investment banks need to be able to take on risk, and that risk level needs to be tailored to each management team. This will allow each investment house to present itself as different from the competition. The two situations are mutually incompatible from the view of the entities investing in these two bank types. That makes separation economically imperative.
We will probably dominate in the short term, as we have the economy best able to bounce back and the investment experience to take advantage of that. The long term leaves us in second, third or fourth place. There is no way for the US to overcome the sheer mass of the population of China or India. Their total economic power will exceed the US economic power long before China???s per capita income get close to the US per capita income. We will remain a global economic power for many years. Our free enterprise system functions far better than any other country. But eventually 300 million will lose to billions.
Three statements in this article stand out:
"It's more that [American banks] are cleverly gaming the government's new Public-Private Investment Program to their own advantage." Business as usual, dictated by greed rather than the common good.
"The lending practices of [Chinese] institutions are completely opaque, and thanks to the massive Chinese state stimulus program that's now underway, lending is more than ever dictated by the whims of the government." China comes first, the Chinese banks second.
"This is not to say that China won't eventually punch its weight in the financial industry." America and American banks will survive - for now. But what about the future?
The future we need to be preparing for is one of American banks working together to compete successfully against Chinese banks, (and others) rather than American banks only competing with each other for their own gain.
If Chinese banks will be operating opaquely to keep China solvent and competitive, shouldn't American banks also be focused on what's good for America, rather than only what is good for Mega-Bank, USA?
Banking industry regulation needs to be focused not only on preventing institutional greed from within, but on creating a firm foundation to resist attacks from outside.
Otherwise, we are just sowing the seeds for the next banking debacle, from which we won't recover: takeover of our economy by the Chinese.
You made very strong argument. I had the similar observations: Chinese banks are backing the state-owned companies to do "real business", e,g. electrical car development, resource acquisition, infrastructure development. There are corruptions, but the banker leaders are still motivated toward the common interests of the state.
You know this article's tone of "American banks can't be replaced by China's because.... Americans are better !!! some how reminds me of the way we used to think about Japanese automoviles when compared to Americans, remember those days ?
The worst mistake Wallstreet is about to make is (again) to not learn from their mistakes. They are about to go the way of the U.S. Automotive industry. When arrogance makes you belive that your competition can't adjust, and grow to your level, .... You will loose the game as sure as their's a God in heaven.
China owns large parts of the world already. I actually think the "superpower" label has already shifted over to that nation, and that the official ranking is just a formality. The U.S. is going to keep insisting that military power will dominate, but the massive cost of overhead (especially of our far-oversized nuclear arsenal) is just going to be a hindrance in the 21st century, when the primary wars will be economic in nature. China's perfectly placed to quietly take the lead behind the scenes the way they already have been if they don't make the mistake of falling into the trap of jingoist militarist thinking. Their military and nuclear defenses are just about perfect for deterrence, which is what's necessary, and if they modernize they'll have far lower defense costs than anyone else. And economics are second nature to the Chinese. America's going to keep focusing on bombs and guns and miss the boat on realizing that 21st-century geopolitical conflict is going to be based in the office towers of the world, not the Pentagon or the August 1st Building in China or any other military stronghold.
The first lease in the new Freedom Tower is to a Chinese company...
Beat the rush and learn how to speak mandarin now.
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