Thursday, December 03, 2009

China: Putting Bubbles to Good Use

China seems to do everything different from the United States. While the United States dithers and rewards Wall Street for its avarice and arrogance, China is channeling the power of speculative bubbles into a different direction, transforming financial forces into actual energy--that is, sustainable wind energy.

On November 9, China Longyuan Power Group--Asia's largest wind power generator--announced it planned to raise US$1.3bn in a Hong Kong IPO. By the time the book closed to investors on December 2, the IPO was 29 times oversubscribed and China Longyuan was expecting to take $2.3bn.

With world investors--in panic mode and ever-seeking the global recession-diminished opportunities to seek yield--are running in hordes toward such high-profile IPOs. You know, the kind of IPOs where a state-owned power company partners with foreign financiers, oh and the fire hose of Chinese fiscal stimulus is poised to spray substantial funds in the direction of sustainable energy. It's a win-win-win situation (in the words of Michael Scott).

Contrast China's financial approach with the experience of the United States in the past decade. In the early oughts, we got the Enron bubble and the telecoms bubble. Under the US financial structure Enron succeeded in warping both energy markets and real energy production and distribution, and collapsing in a puff of smoke that cost employees and investors billions; meanwhile, the telecom companies built band-width super-highways to nowhere. Later in the decade Wall Street gave us a real estate bubble where the houses were built on sand. Then we were loath to discover that the Wall Street financial houses were also built on sand. Somehow they talked us into helping them dig their houses out of the sand, and when we were done just kick more sand in our collective faces.

China, instead, has found a way to harness the American proclivity for carnal financial plundering for good--to finance construction of a modernizing clean-energy infrastructure to power a modernizing economy.

Perhaps the Chinese are the true financial alchemists: turning our base metal into green.