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The world is changing... Is it good?

It is now official - the world is changing, and Asia is leading this change.
First it was Middle East, then Singapore, and now China is joining the race to bail out the ailing Western financial institutions. China Investment Corp. (CIC), a sovereign wealth fund (SWF) will be holding up to 9.9% of Morgan Stanley shares by injecting as much as USD 5 bln. Rejoice the West, the East is coming to help you! Or is it?

SWF accumulate government money that come from oil, trade or other sources, and therefore cannot be independent in the way they conduct their investments. They are formed by governments and work for them. And if Middle East and Singapore have long-lasted business relationship with the West, and can be at least to some extent expected to stay within the limits of business practice accepted in the West, can CIC be trusted just as much?

CIC was established this year, and instantly made headlines by investing into Blackstone Group LP at the time of IPO. They later made losses as the stock price plunged. It is headed by Lou Jiwei, a former Deputy Secretary General of the State Council, and is therefore susceptible to political influence. In the world where China is growing increasingly assertive, is giving away a close-to-ten-percent stake for cash injection a good idea for Morgan Stanley?

It may facilitate doing business in China, but it will surely introduce a risk of being caught between the beetle and the block of the US and China's political interests. Will it happen? Let's see...
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Anonymous said…
Japanese are leading again. Nice article in WSJ today.
August 13, 2008 at 5:08 PM
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