Chindia Steamroller

Last night I saw a presentation on investing in India and China - Chindia. The thesis was that this region is now a relatively safe place to invest, despite a number of achilles heels, because the enormous wave of enrichment and infrastructure has enough momentum to be unlikely to falter now. The numbers are enormous: with a combined population of 2.4 billion, in each country about half a billion people have already been lifted into the middle class, and the infrastructure buildout is proportionate. In Shanghai in 1996 the biggest skyscraper was the Union Hall, which you can see in an aerial photo clearly standing twice as high as all the surrounding colonial buildings. In 2006 this building is lost in a sea of skyscapers and is now the 48th biggest. China has half a million post-graduate students in universities.

The presenters were pushing infrastructure as the steadiest investment - cement, steel, heavy electrical, etc., and automobiles not far behind: all heavily energy-intensive. Personal electronics is also exploding, so toxic waste is going to be an issue in India (China has already passed waste electronics regulations). Returns of 15%-40% were routine. MERs are high (3-4%) due to the extra management connecting these investments with Canada.

India is about 10-15 years behind China, which is now trying to cool down its economy a little - from 10% to 7-8% GDP growth - but not succeeding. India has little domestic energy so may be more vulnerable to global oil politics; China has lots of coal though it is still looking for lots more overseas.

It's not difficult to grasp the attitude of those who see two very large golden geese here. Nobody suggested that this kind of investment was at any kind of risk from clean energy technologies or consumption reduction.