Investment special: The Chinese century

The 19th century was Britain’s century, the 20th was America’s and the 21st will belong to China. China has had three or four periods of greatness and is on the rise again after being in decline for 300 years.

The Chinese call themselves communists, but they are among the best capitalists in the world—California is more communist than China nowadays. The Chinese work from dawn to dusk, and they save and invest over 35 per cent of their income. They are now the biggest creditor nation in the world, they have large natural resources and their neighbours are successful. The largest creditor nations are all in Asia. That is where the assets are. We all know who the debtors are—the US, Japan and most of Europe.

The way to make money in China is to invest in what you know. Look around you. The Chinese want all of that too. Whether it’s access to education, sports—you name it, they want it.

Chinese tourism is a good example. As a people, the Chinese have not travelled much for around 300 years. That is changing. The Chinese can now take money out of the country and get passports. It’s a similar story to what happened with Japan: in the 1980s people started seeing Japanese visitors all over Madison Avenue and began asking, “Where did all these Japanese people come from?” The same is going to happen with the Chinese, but there were only 125m Japanese. There are 1.3bn Chinese.

Back home, the Chinese have a big problem with their water supply infrastructure, as do the Indians. Lots of money is going to be made out of fixing the water problem. They also have a pollution problem and money is going to be spent on that, too. The Chinese are also spending money trying to solve their agricultural problem.

Their currency, the renminbi, will appreciate a great deal over the next few years. Whenever you can buy it—and it is hard to buy—do so.

If you’re thinking of investing in China, remember though, the Chinese are making sure they make most of the money and that’s just the way it works. During its period of dominance, the US did it; Britain did it to people too. When you—the British—went into places, you made sure that you made the money. Now it’s the same with the Chinese. In China you have got to have a very good partner and make sure you know what you are doing.

People worry about Chinese economic growth and whether it can be sustained. It is worth remembering that in the US in the 19th century, we had 15 depressions, a horrid civil war, few human rights, little rule of law, periodic massacres, you could buy and sell congressmen (you can still buy and sell congressmen, but in those days they were cheap) and in 1907 the whole system was bankrupt. This was just as the US was on the verge of becoming the most powerful country in the world.

China is similarly on the brink. All countries experience setbacks and China will have a lot of development problems as it rises. They are making a couple of mistakes. First, they have this blocked currency which is one of the reasons they are experiencing inflation. This also means there is a lot of excess currency flushing around within the Chinese economy and hence it all goes into assets. Second, they subsidise a lot of products, which distorts supply and demand.

The one-child policy is also a problem. It is generating a lot of spoiled children and a terrible shortage of women. Now in China, for every 100 girls there are 119 boys born—when this generation grows up, there will be a lot of very spoiled, very horny guys trying to get laid, but few women. That’s going to be a big problem.

But the very best way to make an investment in China is to teach your children and grandchildren Mandarin. It will be the most important language in their lifetime. My children both speak Mandarin fluently. I am not just talking about all this, you see—I am doing it.