Mr Gullible presents a distorted picture
HSBC chief's relaxed view on shadow banking will please the mainland cheerleaders, but the video will be scary if we fast-forward to the crash
The [HSBC annual general] meeting began with a video on the future global use of the yuan. [Chairman Douglas] Flint said the development of the yuan as an international currency would be one of the bank's most exciting long-term opportunities ...
Chief executive Stuart Gulliver said the shadow banking problem on the mainland was not a big risk, because regulators were aware of the issue and were focusing on it.
SCMP, May 25
I have had an aversion to meetings that begin with videos ever since Shui On chairman Vincent Lo Hong-sui forced a group of investment managers I was leading around town years ago to sit through two videos in a row on his corporate theme - Jonathan Livingstone Seagull, a 1970s New Age mascot.
As Hong Kong has no seagulls, I could see how he might be so starry-eyed. Any Vancouverite who knows what will happen to his car if he parks it under a seagull flight path would think differently. You may, too, given that this bird-themed company's principal business at the time was concrete production.
But back to HSBC. Just what is it that makes the directors of one of the world's biggest banks think that the opening statement of their AGM, the quintessence of where the business stands, is best expressed by technicians in jeans and baseball caps, whose expertise lies in angling and editing camera shots?
Yes, I know these people were given directions by the bank's public relations department. That's the blind leading the lame, another bunch whose expertise lies in angles and edits rather than banking. Freedom of artistic expression reigned, I'm sure. I know it without having seen this video.
Yet, strange as it seems, the technicians in this case may have done better than the bank's directors could do. The technicians, at least, only offer ignorance. The chairman and the chief executive, in my opinion, offered misinformation.
We can perhaps excuse them. If you want to keep sweet with the authorities in Beijing, there is little you can say about prospects in China other than that things look wonderful, beautiful, onward into a bright future, may the sun ever shine.
Messrs Flint and Gulliver have had plenty of practice in thus saying what is required of them. They did it all last year to conceited American politicians who blamed the bank for the incompetence of their own law enforcement agencies in money-laundering matters.
"Yes Sir, yes Sir, it's all our fault, Sir, and none of your own," these two intoned time and again.
If it were me, I would have been driven to screaming fury within days. Yet they kept their tempers throughout. That's why they hold the top jobs in the bank. They can say nothing with great aplomb and swallow their rage. I only wonder if their homes contain any intact vases. Mine wouldn't.
But the fact remains that, as an international currency, the yuan is an exciting long-term opportunity only in the sense that you will have to wait a very long time for the opportunity.
All that has happened is that Beijing has pushed the yuan up against the US dollar, thus making foreign exporters to China happy, at least temporarily, to accept yuan in payment. They can hold it to speculate on continued yuan strength. There is little payment in yuan for imports from China. No one holds yuan outside China except for speculation. The game is all one-sided and will break down when Beijing tires of pushing the yuan up.
Real internationalisation of the yuan requires allowing all Chinese citizens to invest their money freely wherever they want in the world. Beijing would then instantly lose control of the economy.
Do you really think Beijing is ready for this?
Likewise, that bit on not worrying about shadow banking because regulators are aware of it. These aren't regulators in China. These are cheerleaders.
Find me the economy anywhere in the world, Mr Gullible, that after more than 10 years of gung-ho, damn-the-torpedoes growth, condones a massive expansion of hidden and unsupervised lending and doesn't in the end fetch up with a mighty crash. You need look no further than the rest of Asia in 1997.
This one could easily be worse. The danger is acute.