Marcus Cake

China has one trillion dollars in foreigh reserves. This has been accumulated over many years of patient and successful exporting. China earns US$140 billion per year from the United States alone. Apparently, most of the one trillion dollars is invested in low-yielding US bonds. According to the IMF, China only needs 650 billion (65% of one trillion) to provide a safety buffer to operate its economy. China is considering reallocating US$350 billion into other investments that may provide a higher yield. With ongoing trade surpluses, it could invest one trillion dollars over the next yen years. China could become the world’s largest private equity investor.

Halliburton is restructuring its business to reflect new realities. The suppliers of oil are in the middle east. The largest customer for oil will soon be Asia. Capital is moving to non-US markets. An increasing proportion of revenue and capital will come from outside the US.
What makes a company a US company? Is it where its customers are? Is it where they have most of their employees are? Is it where future growth will come from? Is it where shareholders reside? Is it where it is incorporated? Subtle changes occured in Halliburton and the world which have all accumulated over time. A change in incorporation may simply reflect new realities. The Halliburton is a very public statement of global shifts. I do not know what conclusion can be drawn from the strong political reaction.

To ensure their survival, all organisations must serve the interests of their stakeholders. In the case of corporations, that is the shareholders. Corporations do not have the luxury of serving the wrong constituency. Quarterly reviews of performance and the possibility of takeovers serve as important tools to keep corporations focused on their constituency.

Demographic shifts are the primary force that drive fundamental change. One billion consumers of US standards are to emerge. The United States will be an important market, but not the primary consumer or financial market in the world. Fiscal mismanagement by the United States will exacerbate the decline of the United States, but it is demography that will result in a more global market. The world will be “better” if the world can evolve from unsustainable debt funded consumption for the benefit of one country to global markets which share the benefits of economic development.

Dubai is spending £140bn to transform itself into a capitalist powerhouse. The strategy being pursued in Dubai is unparalleled in history - a integrated and focussed strategy with unparalleled resources to make it happen. Dubai can build the hard infrastructure, but will the will the people, industries and businesses come? The comprehensive approach may deliver.

What strategies do countries need to adopt to enjoy higher levels of consumption and retirement in one generation? What short-term sacrifices would each citizen need to make? Which countries have leadship that could formulate and implement the required changes? Would the citizens tolerate the short-term sacrifices?

The McKinsey Global Institute (MGI) examined the financial assets of more than 100 countries since 1980. The result is a comprehensive profile of the global capital market (GCM) and an in-depth analysis of its evolution across geographies and asset classes.