Revolution and Flood

Where did we come from?

“Washington Crossing the Delaware” by Emanuel Leutze. Source: Metropolitan Museum of Art

Every society has stories of its founding. In school, we learned about the American Revolution, how a rag-tag band of settlers were able to hold the field against the strongest army in the world. This story has given Americans a sense of identity and direction.

My own family came to America from Scandinavia in the 19th century and settled in the Midwest. The gradual settlement and development of North America by immigrants contributes to our views of government and the economy. For Americans on the frontier 150 years ago, government wasn’t so much a tool as it was irrelevant to their daily lives. Government wasn’t going to help settlers build their homes or sow their fields. The chance to be independent and self-sufficient is what brought millions to American in the first place.

China has a different kind of founding story. Thousands of years ago, the Yellow and Yangtze Rivers regularly flooded, causing great hardship. One year, the floodwaters didn’t recede, and the people were in dire straits. Yu the Great – a minister of works for Emperor Shun – solved this problem by building a network of canals to channel the flood into the sea.

Legendary Chinese Flood area. Source: Wikimedia

This story illustrates the way that many Chinese view the role of the State in their affairs. They don’t want to be left alone, they want the state to be involved in the great issues and problems that they face. Hu Jintao, China’s former leader, was a hydraulic engineer. Most senior Chinese officials have engineering backgrounds.

In China, the State’s dominant role in investments isn’t a result of Communist ideology. It’s part of their national heritage, an outgrowth of how they see themselves and their society. Yu the Great is thought to have been a dedicated engineer, who lived with the workers, had calloused hands, and took little concern for his personal well-being. By contrast, his legendary opponents were corrupt and self-serving.

This is helpful to see how economics “with Chinese characteristics” might look. China’s government isn’t merely a referee, setting the rules of the game, protecting the players from outside interference, and enforcing the laws. It’s an active participant, building the infrastructure necessary for the people to flourish.

As our world grows closer and China’s role in the global economy becomes more and more important, investors need to understand how the Chinese see themselves. Founding stories, like that of Yu the Great, give us a sense of where China has been, and where they might be going.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By | 2018-05-22T06:29:51+00:00 May 22nd, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

Leave A Comment