Fraser Howie is scathing about foreigners' blinkered views, particularly those of his financial colleagues who believe they are God's gift to a reforming China. "Some of the management of these top firms genuinely believe that China is reforming and say 'we will be in there and China needs us.'
"Stop right there. They may need to do it in your worldview, but why are they going to do it and why are they going to do it with you? There is no guarantee that they are going to choose you, Bank of America or Goldman Sachs or whoever. Look at Morgan Stanley's experience with CICC very early on. (China International Capital Corp. was set up in 1995, with Morgan taking 34.3 percent, China Construction Bank 43.35 percent and China National Investment and Guaranty Corp. the balance.)
"Morgan Stanley thought it was going to get a toehold that would lead to a dominant position. Yet within a few years, CICC was partying with (Morgan Stanley's rival) Goldman Sachs. Yet the irony is that Morgan Stanley made an absolute killing financially. They invested $37 million and they got paid that out in dividends many times over and then ultimately sold their stake for the best part of a billion dollars. And yet ultimately it was a failure."