Eldon-Online

P R and C ... and Sixty

P, R and C - three seemingly random letters from the alphabet but which, put together as I write this week, have some interesting meanings.

In the first instance, PRC is of course the key set of initials leading people in many parts of the world to focus on the celebrations in China, as the People's Republic celebrates its 60th Anniversary. A number of friends are already in Beijing waiting for 1 October, to be present and to experience the atmosphere - although I suspect the visuals may actually be better experienced on the television. Wonder if the celebrations will be shown in Dubai, where I am headed?

Of course, feelings about the whole event - the cost, the scale, the symbolism and the multiple messages it sends - are already subject to much scrutiny and interpretation. I have not met anyone yet who is  ambivalent about it, from university professors to taxi drivers and hairdressers (okay, barber in my case!), from Americans to Chinese, Australians and Africans - everyone it seems. From the overly optimistic to the prejudicially pessimistic. And the media for once is very mixed; some actually with glowing positive reports as to what all this means for the future - "balanced" by the downright scary.

China has spent lavishly on a couple of events in the last few years, what with the Olympics and now this parade. And we will never know the exact amounts. But when was the last occasion they spent like this? Maybe 20 years ago when they celebrated their 40th? Let’s remember that China operates its calendar under a sexagenary cycle, meaning that 60 is a particularly important milestone as calendars go. Yes some (or all) of that money could have been used for other purposes and yes, China is not perfect in so many ways. But I would argue it has improved dramatically certainly in the last 30 and is continuing to do so. It is probably one of the only economies in the world today that has some growth – having avoided some of the excesses suffered by its so called “developed” teachers and advisers. Why not have a party, and lighten up a little?

It is always interesting to me that people are quick to be critical of China, who take some pride in their nationalism. Is it possible that the Americans are any less nationalistic, or the Thais or the Singaporeans? As I wrote earlier, China Is not perfect. Its government does things that interfere with civil liberties but you cannot tell me that such issues are not present in the countries mentioned above. Oh, and they all have another thing in common - the death penalty. What a civilized world in which we live!

China is celebrating 60 years in a way they know best. It's a country that has 1.3bn people - of course there's going to be a cast of thousands. At least people can take a little ownership and say that they were a part of it.

Whether it suits us or not, we have to get used to the idea that China is a part of the world in which we live, and will be around for many more lifetimes. Perhaps the time will come when the world is going to need China's help somehow, and they'll have every right to turn around and say - why should we? But they won't, because that's not how they play their game.

Returning to the alphabet, where I started, not only is PRC in the news this week, but for me P and R are also in the news – and just happens to involve C too. Lost?

Public Relations are an important part of our world today. It doesn’t matter if you are a Fortune 500 company, or an individual – PR is all around you.

The announcements made by HSBC at the end of last week concerning the relocation of the Group Chief Executive to Hong Kong were a real PR coup in my opinion. Coming just one week before the 60^th Anniversary, the timing was perfect. The return home, in many ways, provides a ringing endorsement that Asia in general and China in particular is seriously important as far as the economic future of the world is concerned.

I have received many requests from journalists seeking my opinion on the move and on a number of the ramifications surrounding the decisions but I think I had better keep them to myself, other than to say, “Welcome home”!

And before I leave PR. I hope you noticed the announcement last week that the China Investment Corporation (CIC) has invested a substantial sum of money into Noble. That, coming on the back of a rating agency upgrade, saw a lot of positive PR for a company with which I am happy to be associated. 

Finally, I had to smile at a smart (paraphrased) response from the eloquently elegant Madam Fu Ying, Chinese Ambassador to the United Kingdom that I saw on a news channel yesterday who, when asked by a British reporter whether the next 60 years might see a change in China, leading to giving people the vote said, “You mean, copy the way you do things?” Touché Madam. 

All in all, a pretty good week for P, R and C – and happy birthday to a Sixty Year Old from an Over Sixty!

"What Did You Learn In School Today?"

Maybe you don't know, or more likely have never heard of, the song by Pete Seeger with the above title. Actually, of course many of you have probably never heard of Seeger either but that's merely a function of age. An incredible folk singer, activist and great human being who at 90 is still going strong.

The song title jumped into my head today as I contemplated a question I was asked at a Forum in Singapore last week by an old and much respected friend, Tommy Koh, and a follow up question that was put to me in Beijing which had a bearing on what I said last week.

Tommy asked me if I could consider three lessons that I had learnt from the financial shenanigans of the last couple of years. A tall order I thought, to cover briefly - and only three of them at that - when there were so many thoughts running through my head.

In the end I did what I know other people do in a similar situation. I panicked. But I did think of three things. Three lessons that I learnt in "school" - perhaps not a formal school, and perhaps not today, but over a long period of time and that have come into focus recently. 

"Basics", when linked to financial services, may be boring but there do not seem to be many financial institutions who stuck to the basics that went far wrong during the recent crisis. Let's face it, banking is not all that difficult. You are entrusted with other peoples money because they believe you are going to keep it safe. You have custody of that money and lend it to others who can use it to improve their businesses and/or their lives - and who will pay it back to you of course, so that when the depositors turn up asking for their money back you can return it. You can provide other services, but you should not go too far off the beaten track - especially with other peoples money. Lesson number one, if I have learnt anything at all in 40 years of banking - basics will rarely let you down.

"Greed": It doesn't seem to matter what angle you look at it from, the recent crisis was fueled in a large part from a desire by many participants to take a short cut to wealth. Deals were created that were inherently unsafe. Credit standards were allowed to drop, because there was a chance to make more money than ever before - in a short space of time. Many participants in the market knew there were problems brewing, but they wanted to get their bonuses and move on before everything hit the fan. 

And as I have written before, bonuses are a part of life in the industry, but I think much more care would have been taken over the creation of some of these instruments of financial destruction if bonuses had been staggered, instead of being paid out quickly in lump sums. (And yes, this is a generalisation because some people were not paid out immediately, but I am talking about an industry on the whole). Lesson number two, reward well when deserved, reward fairly because it is the right thing to do, but don't hand it all out at once.

"Education": It seems to me that too many people were involved in financial dealings who had too little knowledge about what they were dealing in. You are rarely too young and never too old to learn new things. Boards of directors, for example, who approved products without asking some of the relevant questions because they felt they should already know the answers, and to ask would be a "loss of face". People who were selling products were insufficiently educated about what they were selling. Not their fault in many cases - it was management pushing sales targets, and telling their sales staff that "mini-bonds" were good. Regulators perhaps not moving quickly enough because they did not fully understand what was going on. Lesson number three; education at any time will never go wrong, and just because you happen to be a senior person and ask a question does not mean that you are losing the plot.

Those, then were the three answers I gave at the Forum last week, and then today it was suggested that every financial crisis is different, and that you cannot necessarily find answers from lessons of past crises. And while I agree that there are always some differences they are usually subtle as very often the basic problems are the same, and I return once more to the lessons from my recent favourite book, The Country Banker, where the author talks of the importance of learning "to distinguish those transactions in banking which are safe and legitimate from those which are unsafe". He cautions about the potential negative influences of the media, he warns of banks seeking to enhance profits imprudently at times when interest rates are low over a long period of time.

All characteristics of this crisis, all comments from a book written in 1885.

So what did you learn in school today, this month, this year, through your career? Whatever it was, it should provide a lesson for the next time, and be passed on - although it won't; no matter what new regulations we put in place, someone, somewhere is going to say "but it's different this time!".

Korea - Hopes, Dreams ... and Reality

I like Korea. If I didn't, there is no way I would get involved as I have; what would be the point? Certainly Korea has its critics, both from inside and outside the country, but then what country doesn't. And just like every other country, emirate, state or region in which I have lived and worked in the last 40 years or so, Korea has its hopes and its dreams. The skill required towards achieving those dreams, though, is to indulge in an ongoing reality check to see whether and by how you much closer you are getting.

In September last year, South Korea was upgraded to "Developed Market" status by the FTSE Group - one year later than had been anticipated, but it happened. It is a status that many widely believe to have a significant impact on asset allocations by Fund Managers and a move that was, naturally, welcomed in Korea. Dream achieved.

During the last eighteen months it has been my privilege to sit as a Special Adviser on the Presidential Council for National Competitiveness. A Council that meets monthly and has undertaken to review many of the country's rules, regulations and laws with the aim of creating, inter alia, a more friendly business environment both for domestic and foreign participants. The meetings are chaired by a senior member of the Blue House, but are always attended by the President who remains throughout the length of every meeting. Much progress has been made over the period so far, but it takes time for this information to reach the world outside and in some cases legislation has been difficult to push through when dealing with a traditional culture where change is often viewed with some suspicion.

One of the more prominent dreams, for Seoul in particular a number of other cities and regions in general and the country as a whole, is the creation of a financial hub in Korea. After all, look around the region - Tokyo, Shanghai, Hong Kong, Singapore and a number of other aspiring centres and you can see the attraction of wanting to join in. Developed markets are generally service centres, rather than centres of heavy engineering and manufacture. But if you ask around the region and then further afield for their diagnosis of Korea's ability to become a financial hub, the view is that it is a long way down the list. That is a reality.

And while we are at it, let's just think of another financial hub reality - the reality of the huge Japanese economy on the one side (slow moving though it may be), and the ever growing and powerful economy of China on the other - and guess who is in the middle?

Korea certainly needs to do something, but why does it give negative perceptions to the global financial community? Because the financial scene in Korea remains less inviting to the very people who should be encouraged to enter the market. Existing rules and regulations remain ambiguous and complex despite ongoing attempts to make them clearer. But more needs to be done to unravel these regulations and to open up the financial services market wider to more participants.

Such concerns raise the noise levels around "obstructive ambiguity" and lead to charges of protectionism - of course not just in the case of Korea but around the world. And let's be clear, there are plenty of Governments whose actions suggest they say one thing and do another; think "Buy (Country)", think of the European Government that provided money for auto makers on condition they stayed in that country, and some months later very publicly spoke out on the subject of never returning to protectionism.

I can say this; I have heard President Lee say himself publicly, and maybe more importantly privately, that he has no time for protectionism. I certainly hope that his administration pays close heed to his words - especially as Korea is about to lead the G20 in 2010. The last thing Korea will need is to be confronted with any examples of protectionism as they move into this leadership role. That could put a halt to the hopes of a greater involvement from the outside world.

I was invited to advise, and I do so freely. Happily I am in a position where I can suggest certain courses of action - even if they may not be universally popular, but I do so with the best of intentions because I would like to see Korea succeed. Better that we have a collection of strong players in Asia than just one or two.

But never underestimate the Korean single-mindedness of purpose. They have proved time and again in their young democracy (which many forget is only 22 years old), that they can get things done once they put their minds to it. The world is a big place, and they need to be a two-way part of it if the dreams and hopes they nurture are to become reality.

Travels in China - Part Six: The Conclusion (by Paul Eldon)

March On! March On! On!

We had been in far western China for one week travelling in what I would argue was out of our comfort zone. Although the journey had been a truly once-in-a-lifetime experience, the beds were hard and the roads even harder. While we boldly sampled everything, the food was not always to everyone's palate. The days were full and exhausting. The gin smuggled from Hong Kong (and the local brews) had been much needed nightly elixirs and, honestly, I think we were all looking forward to our last stop - Xi'an.

Xi'an (split by an apostrophe in pinyin to encourage the speaker to articulate the two characters 西 [xi - west] and 安 [an - peace], otherwise it runs together as 'xian' which, depending on how you say it could mean a whole host of other things including 'first', 'salty', 'conspicuous' or 'county') holds a special place in Chinese history. For two thousand years it was the imperial capital of China, the start of the Silk Road and home to eleven dynasties of emperor. In Europe as the Western Roman Empire fell, the Visigoths asserted their dominance and the west entered the Dark Ages, the Tang Dynasty Buddhist monk Xuan Zang set off from Xi'an on his remarkable fifteen-year sojourn to India, bringing back countless Buddhist texts and whose flaming mountains described in "Journey to the West" we saw in Turpan. After falling out of favour with the Ming emperors, in the chronicles of early 20th century Chinese history Xi'an once again opened its arms to embrace leading figures of the time including the Empress Dowager Cixi and Generalissimo Jiang Jieshi better known as Chiang Kai-shek. The former fled to the city and set up her court in exile for two years after her ill-advised support of the Boxer Rebellion, while the latter was arrested in 1936 during the civil war in what would become known as the Xi'an incident. So if you like history, as I do, there is certainly a lot to think about when in the left corner of China's travel triangle (Beijing-Shanghai-Xi'an).

In my infinite wisdom I had made reservations at the Kempinski Hotel both because I figured we'd be ready for some Egyptian cotton sheets and because of the Chengdu connection, which I hoped would work in our favour. Although I can't fault the hotel in the above two regards I had failed to notice that it was based out in the boonies giving us a handy 40 minute minibus ride into the centre of Xi'an and the famed walled city.

Like walking on the Great Wall outside of Beijing, rambling atop the 14km (restored) ramparts of a structure originally constructed in 1370 is an emotive experience; modern China juxtaposed against its ancient ancestor. It is possible to complete a circuit in just over 90 minutes on bikes, but instead we enjoyed a journey between the Yongning Gate in the south and Anding Gate in the west in rickshaws pulled by jovial and helpful drivers. We descended the wall and entered the city eventually finding ourselves in the Muslim quarter. Although we'd been exposed to China's Muslim culture in Xinjiang the hustle and bustle of the winding alleys of the quarter were as fascinating as if it were our first time. Food vendors and souvenir sellers hawked their fare in loud voices while our senses were assaulted by the smells and sounds of the lunchtime rush. It wasn't long before our stomachs joined the caterwauling and we sat down at an open front restaurant to enjoy a Xi'an speciality - paomo, a meaty soup poured over tiny bread cubes. Despite the vast size of each bowl (another bonus of Chinese cuisine) and the questionable hygiene of the chosen establishment it was mouth-wateringly delicious, and I was sorry that it was the first and only time I enjoyed the dish.

The primary reason for a trip to Xi'an is the visit the tomb, and terracotta soldiers that guard it, of the Qin emperor Qin Shi Huang (246 - 221 BC), the first emperor of a unified China. It is staggering. Not only for the scale of the entire site but the details of each warrior where no two faces are the same. The restoration work carried out is a marvel in itself as each figure has been painstakingly put back together since they were discovered in fragments. It would take generations to rebuild every warrior but the few hundred or so of the ones on display give you a good enough idea of what it would have been like. The tomb was discovered in 1974 by some peasants who were digging a well and, as an added bonus, when we visited the gift shop one of the chaps was there signing coffee table books about the exhibit. You are not allowed to take his photograph, not does he seem to respond to questions but it was fun to add a signed copy to my guide-book collection. It's a fascinating but tiring few hours and an important stop on any China trip. Equally fascinating and tiring is the Shaanxi History Museum which we ventured into after a filling dumpling lunch. It's a very well put together museum and, I have to say, I think Beijing could learn a thing or two from some of its provincial cousins. (If Shenyang, Xi'an and even Dunhuang can do it there's no reason why Beijing can't.) We were led around the museum by a rather formidable young woman who had strong views about China's impact on global history. Although I'm not disagreeing with everything she said, I do rather feel that her rabid nationalism might work against her when she travels to Paris later this year to tour the museums. To her credit she's passionate about what she does and at least she's heading overseas to learn from others as well.

China "Experience" Rating: 8/10.

As one of China's top three travel destinations Xi'an is using its tourist dollar income extremely effectively and is a pleasant and worthwhile trip.

Epilogue.

After a 5,000 mile round trip from Hong Kong to the Kazakh border I believe China to be a captivating country, and I do hope that foreigners will travel to the Middle Kingdom and see past the Communist badge that, make no mistake, is worn contentedly by many millions, but which rarely impinges on a visitor's journey. The Chinese are a proud, friendly and inquisitive people. While we all have stories about being hoodwinked and bamboozled by an unscrupulous few it's somewhere that is as enjoyable to visit and, I'll wager, more diverse in its topography and customs as Italy, France or the USA. It has gleaming metropolises and dirty peasant villages. It's somewhere where history is everywhere and nowhere. It was a place I called home for eight years. It really is a people's republic.